Crumbling office rents take a breather in Q2

Grade A office landlords are holding fast to their rent prices and has helped arrest continued steep declines.

For Q2, rents are expected to hover around the 3% level, an improvement from the fall of Q1. The downward price pressure, while mitigated by landlord resistance, is driven by companies' "wait and see" attitude to office expansion as the global environment remains rocky.

Here's more from Jones Lang LaSalle:

In those markets that were experiencing office rental declines in previous quarters, the Markets teams are anticipating a slowdown in the rate of decline. In Singapore a fall of three percent is anticipated by the end of the current quarter, compared to an actual 5.2 percent decline in Q1 2012.

Grade A office rents expected to decline c. three percent in Q2, less than in the first quarter of the year. Rentals are mostly taking place in new buildings, but there have been very few transactions in the current quarter to date. Landlords of buildings with high occupancy levels remain firm on their rents, which is why we are projecting only minor declines in Grade A rents this quarter. Headcounts remain stable but many companies are adopting a ‘wait and see’ approach towards leasing decisions which is equating to sluggish new demand, particularly amongst large financial services firms.

Jeremy Sheldon, Managing Director, Markets Asia Pacific Jones Lang LaSalle commented: “We continue to see the majority of Multi National Corporation’s across Asia Pacific adopt a ‘wait and see’ stance on expansion, given economic uncertainties, which is having a delay effect on their property decisions. This is translating into static rents in some markets, and smaller rental declines in others. We are finding those landlords who can afford to “sit” are doing so, thus holding fairly firm on asking rents. This is resulting in stability in rents for now.