The Office Index

Fourth Quarter 2018

Solid performance in Asia Pacific leasing markets Shanghai CBD quarterly rent growth slowed largely because of
Asia Pacific leasing markets continued to perform in 4Q18 new supply in Pudong while Beijing CBD rents were flat q-o-q
with full-year 2018 volumes up 21% over 2017. Flexible space as landlords took a more conservative stance on leasing. Tokyo
continued to be a major driver of leasing activity across the rent growth strengthened on the back of broad-based demand;
region, but operator leasing activity slowed in some markets. tech firms stood out. Seoul CBD rents declined marginally as
landlords increased incentives.
Seoul saw the biggest improvement in quarterly leasing
volumes of any major market on the back of relocations from Elevated vacancy levels circumscribed rent growth in Delhi SBD
large domestic corporates and professional services firms. and Mumbai SBD BKC. Healthy demand saw Bengaluru SBD
While occupational demand was strong, Tokyo volumes rents resume growing despite a large volume of supply.
declined sharply amidst tight vacancy and limited pre-leasing
options. Similarly, Melbourne and Sydney leasing activity was Asia Pacific Office Rental Values, 4Q18
constrained by tight conditions. Hong Kong (Central)
Beijing (CBD)
Shanghai quarterly leasing volumes continued to benefit Tokyo (5 Kus)
Shanghai (CBD)
from opening up policies which stimulated occupational Singapore (CBD)
Sydney (CBD)
demand from foreign financials. Hong Kong quarterly leasing Taipei (Xinyi)

volumes were up slightly on y-o-y basis supported by tenant Ho Chi Minh City (CBD)
Seoul (CBD)
decentralisation and flexible space operators. Flexible space Guangzhou (ZJNT)
Mumbai (SBD BKC)
operators along with technology firms underpinned modest Osaka (2 Kus)
Auckland (CBD)
growth in Jakarta leasing activity. Manila quarterly volumes Hanoi (CBD)
NCR Delhi (SBD)
were down y-o-y although leasing demand remains strong Melbourne (CBD)
Wellington (CBD)
supported by the tech, online gaming as well as offshoring Bangkok (CBA)
Manila (Makati)
and outsourcing sectors. Jakarta (CBD)
Perth (CBD)

Rent growth decelerates slightly Brisbane (CBD)

Bengaluru (SBD)
Canberra (CBD)
Asia Pacific rents maintained trajectory despite heightened Chennai (SBD)
Kuala Lumpur (City Centre)
uncertainties, growing 1.0% q-o-q in aggregate in 4Q18 Adelaide (CBD)

compared to 1.2% in 3Q18. Hong Kong Central rent growth 0 500 1,000 1,500 2,000 2,500
continued to slow as demand from Mainland Chinese financials Net Effective Rents (USD psm pa)
softened. Singapore rents trended up as landlord favourable
Source: JLL (Real Estate Intelligence Service)
conditions strengthened again.

Asia Pacific Office Rental Values, 4Q18 Asia Pacific Office Rental and Capital Value Indexes,
Hong Kong (Central)
1Q08-4Q18
Tokyo (5 Kus)
Singapore (CBD) 150
Beijing (CBD)
Taipei (Xinyi) 140
Shanghai (CBD)
Sydney (CBD) 130
Osaka (2 Kus)
Seoul (CBD)
120
Guangzhou (ZJNT)
Melbourne (CBD)
110
1Q08 = 100

Perth (CBD)
Auckland (CBD)
Brisbane (CBD) 100
Ho Chi Minh City (CBD)
Mumbai (SBD BKC) 90
Canberra (CBD)
Bangkok (CBA)
80
Adelaide (CBD)
Wellington (CBD)
Hanoi (CBD) 70
NCR Delhi (SBD)
Manila (Makati) 60
Jakarta (CBD)
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
2Q14
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
2Q18
4Q18

Chennai (SBD)
Kuala Lumpur (City Centre)
Bengaluru (SBD)
Rental Index Capital Value Index
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000
Capital Values (USD psm) Source: JLL (Real Estate Intelligence Service)
Note: The indexes are stock-weighted averages of rental and capital value
Source: JLL (Real Estate Intelligence Service) movements across Asia Pacific
Capital value growth slows
Slower rent growth and rising borrowing costs in a number of
markets saw aggregate Asia Pacific capital value growth slow to
1.7% in 4Q18, down moderately from 2.2% in 3Q18.
Singapore stood out among the major markets in the region
as investors remain confident in the city state’s future growth
prospects. Sydney also recorded robust capital value growth as
institutional investors looked to recycle capital in the market.
Tokyo capital values trended up in line with rents as borrowing
costs remained low. Capital values grew at a slower pace than
rents in Hong Kong, Shanghai and Beijing due in part to higher
borrowing costs.
Asia Pacific markets set to hold up
While economic uncertainties have increased, particularly
in relation to the US-China trade war, occupational demand
is expected to hold up. But the prospect of another year of
solid growth in leasing volumes is dim and instead we expect
to see full-year 2019 volumes match 2018 levels. Financials,
professional services and tech firms are expected to remain
the key sources of leasing demand. Flexible space operators
will likely remain a key driver as the structural shift in office
tenant profiles spreads to new markets. Due to heightened
economic uncertainties and flat leasing volumes, we have
revised our full-year rent forecast down slightly from 3% to
2.5% in 2019.
As investor demand for office product remains strong, and
fewer US Federal Reserve rate hikes are expected in 2019, we
believe there is still some room, albeit limited, for late cycle yield
compression in select markets. As such we expect capital value
growth to again outpace rent growth, registering 3% in 2019.

4Q18 Average Quarterly Change Yearly Change 4Q18 Average Quarterly Change Yearly Change
Grade A Rent 4Q18 vs 3Q18 4Q18 vs 4Q17 Grade A Capital 4Q18 vs 3Q18 4Q18 vs 4Q17
(USD psm pa) (Local Currency) (Local Currency) Value (USD psm) (Local Currency) (Local Currency)
Hong Kong (Central) 2,113 1.0 8.0 80,879 0.7 13.3
Beijing (CBD) 1,033 0.1 4.6 19,975 0.8 11.6
Tokyo (5 Kus) 872 1.9 3.5 31,153 1.9 7.2
Shanghai (CBD) 821 0.7 2.1 15,138 0.0 1.7
Singapore (CBD) 777 2.6 12.1 21,816 3.3 12.2
Sydney (CBD) 582 1.4 6.4 15,125 2.4 8.1
Taipei (Xinyi) 534 1.7 4.4 17,792 1.7 4.4
Ho Chi Minh City (CBD) 512 0.3 3.3 6,022 1.4 10.6
Seoul (CBD) 509 -0.4 0.5 11,455 -0.4 0.5
Guangzhou (ZJNT) 484 -1.7 8.3 11,056 -1.9 8.7
Mumbai (SBD BKC) 465 -0.1 -1.6 4,895 0.8 -0.9
Osaka (2 Kus) 435 3.9 16.6 14,025 7.2 27.9
Auckland (CBD) 358 1.3 1.7 6,482 9.7 12.3
Hanoi (CBD) 289 0.1 4.2 3,318 1.2 10.8
NCR Delhi (SBD) 269 0.0 -1.8 3,021 0.0 -1.8
Melbourne (CBD) 269 0.1 8.0 10,145 0.1 6.4
Wellington (CBD) 263 8.0 9.5 3,953 13.7 23.5
Bangkok (CBA) 262 1.8 10.6 4,134 2.6 13.2
Manila (Makati) 247 1.9 6.9 2,854 2.5 9.1
Jakarta (CBD) 221 -1.3 -7.3 2,815 -1.3 -7.3
Perth (CBD) 192 0.4 4.3 6,911 3.5 4.0
Brisbane (CBD) 189 1.1 3.7 6,475 0.3 6.4
Bengaluru (SBD) 180 2.1 3.1 1,783 3.1 4.1
Canberra (CBD) 175 -1.5 -0.1 4,231 -0.9 2.3
Chennai (SBD) 141 2.3 12.9 2,232 2.3 12.9
Kuala Lumpur (City Centre) 136 -1.4 2.1 2,046 -1.5 1.7
Adelaide (CBD) 119 1.2 4.2 4,006 0.2 3.7
Notes: All rents are net effective. Rents and capital values are on a net lettable area basis and relate to the major submarket in each city.

Christopher Clausen
Director, Asia Pacific Research
christopher.clausen@ap.jll.com

JLL
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however, no representation or warranty is made to the accuracy thereof.

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