Apac Prime Office Rents Fall 25 Y O Y 3Q202
In 3Q2024, Knight Frank’s report revealed a 2.5% decrease in prime office rents across the Asia Pacific (Apac) region compared to the same period last year. This decline is a slight moderation from the previous quarter’s 2.8% drop. On a quarterly basis, there was a minimal decrease of 0.1% in prime office rents in the region.
The decrease in office rents in the Apac region was largely driven by cities in mainland China. Beijing saw the steepest drop in prime office rents, declining 11.3% year-on-year and 1.9% quarterly. Other Chinese cities like Shanghai (-11.2%), Hong Kong (-9.4%), Shenzhen (-9.2%), and Guangzhou (-6.4%) also saw declines in rents on a year-on-year basis. On a quarterly basis, these cities recorded decreases of 3.2%, 1.8%, 2.5%, and 0.1% respectively.
Despite this trend, Indian cities continued to show growth in prime office rents, with Mumbai and Bengaluru recording year-on-year increases of 5% and 3% respectively. The Delhi National Capital Region, on the other hand, remained stable in terms of rents.
Australian cities also experienced a rise in prime office rents, with Brisbane leading the region with a 11.4% year-on-year increase, followed by Perth with a 5.4% growth.
On a quarterly basis, Mumbai (5%) showed the highest growth in rental prices, followed by Brisbane (4.2%) and Bangkok (3.1%).
In Singapore, prime office rents grew by 0.6% quarterly and 2.7% year-on-year in 3Q2024.
Overall, 16 out of 23 cities tracked by Knight Frank showed stable or increasing prime office rents compared to the same period last year, an increase from 15 cities in the previous quarter.
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Vacancy rates in the prime office market also displayed signs of stabilizing, with a quarter-on-quarter decrease of 0.2 percentage points to 14.8%. This is the first recorded drop in vacancy rates since 2Q2022.
Tim Armstrong, Knight Frank’s global head of occupier strategy & solutions, suggests that while business optimism may improve as the Federal Reserve eases monetary policy, demand for office spaces will still be influenced by careful spending and workplace strategies that focus on maximizing space utilization.
However, with a decrease in the production pipeline of prime office spaces, any increase in leasing activity could quickly tighten the availability of such spaces. In 2024, almost 12 million sq m (129 million sq ft) of prime office supply was delivered, and Knight Frank expects a 20% decrease in the new office supply pipeline for 2025.
Given these factors, Knight Frank predicts that the Apac prime office market will continue to favor tenants in 2024, with availability gradually decreasing over time.