Rents in Singapore to shoot up 25% in 2011

An aggregate net absorption of 27% q-o-q increase is recorded in 3Q10 for the Asia Pacific's Tier I cities. Economic growth and booming investment is expected to support the rise of lease of property in Singapore and Hong Kong.

Jones Lang LaSalle expects rental growth to pick up in many markets in 2011, with growth in laggard markets accelerating from 2012 onwards. Rents in Singapore and Hong Kong is expected to rise 15 to 25% alongside the economic condition's improvement.

According to the recent Asia Pacific Property Digest released by the real estate services firm, property market fundamentals in Asia Pacific improved further in 3Q10, due to solid economic growth and high confidence levels.

As more markets enter a cyclical rental upswing, the aggregate net absorption of office space across Asia Pacific’s Tier I cities increased by 27% q-o-q to 1.5 million sqm in 3Q10. New supply additions amounted to 1.3 million sqm, a 12% increase on the previous quarter.

In the major financial centres, Hong Kong and Singapore both recorded strong net take-up of office space, while contraction in space came to an end in Tokyo. Relocation and upgrading demand continue to underpin the bulk of the take-up, though there are more instances of expansion in markets such as Hong Kong, Singapore and the Tier I cities of China and India.

Rents are now increasing across many office markets in the region, with residual declines in a few centres including Seoul, Taipei and some South East Asian locations. In 3Q10, net effective rentals in Tokyo increased for the first time since 1Q08 (+3.7% q-o-q), due to shorter rent-free periods. Net effective rents strengthened the most during the quarter in Singapore (+10.9% q-o-q in Raffles Place) and Beijing (+10.9% in the CBD), closely followed by Hong Kong (+8.6% in Central). Rents were flat or fell moderately in most major Australian cities during 3Q10, though rents in Melbourne have been rising for three successive quarters.

Rental growth is expected to pick up in Tokyo, while growth momentum in China’s Tier I cities is likely to slow from the hectic pace of recent quarters.

Leasing In demand strengthened in the luxury and high-end residential markets in Q3, especially in Greater China and Singapore, but remained subdued in most South East Asian markets. Luxury rents in Hong Kong saw the biggest increase (+4.0% q-o-q), while rents in Singapore and Chinese Tier I cities generally rose by about 2% q-o-q.

With corporate expansion resuming and an increasing number of expatriates in markets such as Greater China and Singapore, luxury rentals have entered a cyclical upswing with single digit growth expected for most markets over the next 12 months. Hong Kong and Singapore are likely to see even stronger growth.

Jane Murray, Head of Asia Pacific Research said, “property market fundamentals continue to improve across Asia Pacific, underpinned by stronger economic conditions and business confidence,” adding, “Take up of space is strengthening and in some markets corporate occupiers are finding that space is in short supply. 

Murray said that as a consequence, the leasing market is turning more in favour of landlords and more markets have moved to the upturn phase of the rental cycle. Capital values started to recover earlier than rentals and have now bottomed in most markets. "We expect volumes to pick up further going forward due to strong investment activity in 3Q," she said.