Emerging cities continued to dominate the rental growth in the region, with Jakarta, the capital city of Indonesia, witnessing the highest office rental growth (y-o-y) among 33 cities in Asia, according to privately owned commercial real estate services firm Cushman & Wakefield in its latest Asia Office Q1 2014 report.

The report said that Jakarta witnessed a rental growth of over 27 percent, the highest in the region as the market continued to see the expansion of companies as vacancies tightened to 6.6 percent.

With no new supply delivering in Q1 2014, along with a number of withdrawals due to redevelopment, occupancies in the capital'€™s office sector have continued to witness upward pressures. Leasing enquiries and transaction activities were mostly for spaces under 300 sq m due to limited availability.

Arief Rahardjo, senior associate director, research and advisory, Cushman & Wakefield, Indonesia, said, '€œWhile this year'€™s general elections have created a '€˜wait-and-see attitude'€™ in the market, demand is likely to see positive growth, in line with the projected positive performance of the economy in 2014 and an overall business climate that is expected to improve, especially after the presidential election.

The report said that Manila (Philippines) was in the second position, Shenzhen (China) at third and Pune (India) in fourth position.

In the core markets, Singapore (fifth) and Tokyo(seventh) stood out with positive leasing activity driven by improving business sentiment. '€œWhile emerging markets with strong domestic economies continued to lead the region in terms of rental growth, a constricted supply pipeline in the core markets such as Tokyo and Singapore were conducive to rental growth. However, for the majority of the region, rental growth remains muted with flat or decreasing rents,'€ the report said.

Sigrid Zialcita, managing director of research for Asia Pacific said, '€œOffice market conditions showed a mixed performance in the region. Rental growth was slightly up across Asia Pacific over the year, with an overall regional rental rise of just 2.8% in Q1 2014. The recovery in the U.S. and eurozone, reforms and elections in some of the countries will provide a boost to overall sentiment and bode well for office market conditions in Asia. We expect the regional economy to grow at a decent pace, and in turn, support absorption gains across most markets through the rest of 2014.'€

Sigrid added, '€œLimited availability of Grade A space should enhance landlord leverage and sustain rent increases in some of the core markets this year; However, mounting supply in the emerging markets of Delhi NCR, Kuala Lumpur and Ho Chi Minh City means that these cities will continue to remain favorable to occupiers.'€

Meanwhile, more office building projects worth at least Rp 10 trillion are in the pipeline in Jakarta, leading to a tighter competition in the sector.

The Real Estate Indonesia (REI) secretary general Hari Raharta said that the rapid development of office property in Jakarta was contributed to by the rising number of foreign companies entering Indonesia, which needed offices space.

Property developers are taking advantage of the growing demand by providing rental office space. '€œBut there are also those that offer space under strata title schemes. For established developers, they tend to choose rental office systems as part of their recurring income,'€ he said.

Data at Colliers International Indonesia shows that office projects in Jakarta and surrounding area that will become available in 2014 amount to more than 520,000 m2. The supply will come from 17 projects worth around Rp 10.44 trillion. (JP)

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