Prime office rents in the Asia Pacific region (Apac) fell 3.2% y-o-y in 1Q2024, according to a report by global consultancy Knight Frank. This is bigger than the 2.4% y-o-y fall registered in 4Q2023 and marks the seventh straight quarter rents have contracted. On a q-o-q basis, Apac prime office rents declined 1%.

The y-o-y drop was mainly underpinned by declining rentals in Chinese Mainland cities. Prime office rents in Beijing showed the steepest y-o-y decline out of all Apac cities, falling 11.4%. On a q-o-q basis, Beijing logged a 3.9% fall in office rents.

Similarly, other Chinese cities like Guangzhou, Hong Kong, Shanghai and Shenzhen saw y-o-y drops in prime office rents of 10.1%, 9.5%, 8.1% and 7.6% respectively. On a q-o-q basis, rents in the cities declined by 2.5%, 1.7%, 1.8% and 3% respectively.

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On the flipside, cities like Seoul and Taipei saw prime office rents continuing to grow, reaching multi-year highs. Seoul registered rental growth of 4.1% y-o-y and 0.3% q-o-q in 1Q2024, while Taipei rents expanded 3.4% y-o-y and 0.6% q-o-q. Knight Frank attributes the higher rents to a flight-to-quality trend favouring prime office assets in these markets.

Elsewhere, Brisbane led rental growth in the region with a 6.8% y-o-y increase in 1Q2024, followed by Ho Chi Minh City at 6.6% and Perth at 6.3%. On a q-o-q basis, Manila topped the list (+9.2%), followed by Ho Chi Minh City (+8.3%) and Brisbane (+2%).

In Singapore, prime office rents were up 0.6% q-o-q and 3.4% y-o-y in 1Q2024.

Overall, 15 out of 23 cities tracked by Knight Frank showed stable or increasing rents compared to the same time last year. This number increased from 13 cities in 4Q2023.

Vacancy rates in the region rose marginally by 0.04 percentage points to 14.9% in 1Q2024, with Kuala Lumpur reporting the highest vacancy rates at 29.7% and Seoul reporting the lowest at 1.3%.

Christine Li, Knight Frank’s head of research for Asia Pacific, believes overall vacancies will remain elevated for the rest of 2024, as occupiers remain selective in expansionary plans amid the current economic environment.

In addition, almost 12 million sq m (129 million sq ft), or 6.3% of current supply, of new Grade-A office stock will be delivered in 2024, of which close to 60% will be in Chinese Mainland markets.

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Given these factors, Knight Frank views the Apac prime office market will continue to favour tenants in 2024, with vacancy rates expected to stay on an upward trend.