Knight Frank Asia-Pacific Prime Office Q4 2020

Most major regional economies in Asia-Pacific faced recessions brought about by the COVID-19 pandemic in 2020. In Q4, across the 22 markets tracked by Knight Frank Asia-Pacific’s Prime Office Rental Index, rents fell 0.8% overall. While there is optimism regarding the state of vaccinations and COVID-19 recovery going into 2021, cases resurgence of the pandemic in some of these markets have slowed the momentum of recovery. In this blog post, we take a look at some key markets in the region and examine how they performed for Q4 2020.

India

In South Asia, India’s Tier-1 office markets saw a weaker quarter in Q4 2020, as the key markets of Bengaluru, NCR and Mumbai all contracted by -4.0%, -1.0% and -5.5% respectively. However, transaction activities have begun to recover, with a sizeable 17.5 million sqft worth of deals done in Q4 2020, up 274% quarter-on-quarter, across its 8 major cities tracked by Knight Frank. This signals potential re-initiation of expansion plans by firms which should prop the market’s rent from further decline going forward.

Kuala Lumpur

Office rents in Kuala Lumpur fell 2.8% quarter-on-quarter in Q4, due to weaker office demand as occupiers held off real estate decisions during the uncertain economic climate of 2020. Vacancy also rose 0.7% during the period. Going forward, the office market of Malaysia’s capital city is expected to remain tough, as the market goes into a second lockdown and continues to face challenges with COVID-19. However, integrated developments with MSC buildings as well as transit-oriented assets are expected to fare better.

Tokyo

Tokyo’s office rents fell 3.1% quarter-on-quarter, bringing rents down by 2.9% year-on-year, marking the first decline for the market since 2016. Vacancies also rose 0.5% to 1.3% in Q4 2020. As with many other markets across Asia-Pacific, occupiers are tentatively holding off real estate plans, and this has caused vacancies to inch upwards. However, overall, the market remains relatively resilient. The fresh wave of COVID-19 infections at the beginning of 2021 will dampen optimism for the market in the year ahead.

Mainland China

The office markets across the Chinese Mainland showed further signs of strengthening in Q4 2020. Average rents in Tier-1 cities only fell 1.0% quarter-on-quarter, despite some oversupply in several of their key markets. Guangzhou stood out as a relative outperformer, with only a 0.6% rental decline in the period. Going forward, with China’s economy forecasted to be recovering at great pace, there are potential upsides to the rents in the Mainland Chinese markets.

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To read the full Asia-Pacific Prime Office Rental Index Q4 2020, click here.