APAC prime office rental index inches up 0.8% in 2022

This is despite a 1% decline recorded in the fourth quarter of the year.

Knight Frank has released its latest Asia-Pacific Prime Office Rental Index for Q4 2022 - a comprehensive analysis that tracks the rental performance of prime office properties across 23 key markets in the Asia-Pacific region.

“The index dropped by 1% quarter-on-quarter, marking the second consecutive quarterly decline since Q2 2022. This indicates that businesses are tightening their capital expenditures in preparation for potential market downturns. Despite the quarterly dip, the overall index is still up by 0.8% year-over-year,” the report said.

Here’s more from Knight Frank:

The vacancy rate expanded for the second consecutive quarter (0.8%), as Q4 of 2022 saw some supply entering the market, which, coupled with weak leasing demand and spaces being retired, contributed to the upward trend.

The APAC office market is projected to remain favourable to tenants in the next 12 monthsTim Armstrong, global head of occupier strategy and solutions at Knight Frank, said: “Despite the current economic challenges, rental and occupancy levels continue to be strongly supported by steady demand and limited supply. We expect growth in office rents to moderate as occupiers continue to adopt more flexible strategies and be more prudent with their spending. The trend towards flight-to-quality buildings with sustainable features and varied amenities will continue to gain momentum as businesses work towards their ESG goals.”

Christine Li, head of research at Knight Frank Asia-Pacific, said: “Although Q4 of 2022 did not show an uptick in rents, the full-year rental growth for prime Grade A office spaces remained positive at 0.8%. This marks a reversal of the negative growth seen during the pandemic years, demonstrating the sector’s resilience as it vigilantly navigates through a macroeconomic slowdown. With the much-anticipated reopening of the Chinese Mainland, we expect the entire region to benefit from it in 2023, thus stimulating growth in the APAC office market.”

Asia Pacific Prime Office Rents for Q4 2022