Apac Prime Office Rents Fall 25 Y O Y 3Q202
The third quarter of 2024 saw a moderate decline in prime office rents in the Asia Pacific (Apac) region, according to a recent report by Knight Frank. Prime office rents dropped by 2.5% year-on-year, showing a slight improvement from the previous quarter’s 2.8% decrease. On a quarter-on-quarter basis, there was a marginal decline of 0.1% in prime office rents.
The drop in office rents was mainly due to Chinese cities, with Beijing experiencing the largest year-on-year decline among the 23 cities monitored in the report. In the third quarter of 2024, Beijing’s prime office rents fell by 11.3% year-on-year and 1.9% quarter-on-quarter.
Other Chinese cities also saw a decline in rentals on a year-on-year basis, including Shanghai (-11.2%), Hong Kong (-9.4%), Shenzhen (-9.2%), and Guangzhou (-6.4%). On a quarter-on-quarter basis, rents in these cities dropped by 3.2%, 1.8%, 2.5%, and 0.1%, respectively.
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On the other hand, prime office rents in Indian cities continued to show growth, with Mumbai recording a year-on-year increase of 5% and Bengaluru reporting a 3% growth. Prime office rents in the Delhi National Capital Region remained stable.
Australian cities also saw an increase in prime office rents, with Brisbane leading the way with an 11.4% year-on-year growth in rental prices in the third quarter of 2024. Perth followed closely with a 5.4% year-on-year growth.
In terms of quarter-on-quarter growth, Mumbai (5%), Brisbane (4.2%), and Bangkok (3.1%) recorded the highest rental increases.
In Singapore, prime office rents in the third quarter of 2024 were up 0.6% quarter-on-quarter and 2.7% year-on-year. Out of the 23 cities tracked by Knight Frank, 16 showed either stable or increasing prime office rents compared to the same time last year, an increase from 15 cities in the previous quarter.
The report also showed signs of stabilization in prime office vacancy rates, with a decrease of 0.2 percentage points quarter-on-quarter to 14.8%. This is the first recorded fall in prime office vacancy rates since the second quarter of 2022.
According to Tim Armstrong, Knight Frank’s global head of occupier strategy & solutions, while the business sentiment may improve as the Federal Reserve eases monetary policy, demand for office spaces will continue to be tempered by prudent spending and workplace strategies focused on maximizing space utilization.
However, Armstrong adds that as the supply of prime office space decreases, any increase in leasing activity could quickly tighten the availability of prime spaces. The report also notes that almost 12 million sq m (129 million sq ft) of prime office supply was delivered in 2024, and Knight Frank expects the pipeline for new office supply in 2025 to shrink by about 20% of that.
Taking these factors into account, Knight Frank predicts that the Apac prime office market will continue to favor tenants in 2024, with availability in the region gradually decreasing over time.