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Demand in core markets up by 20%; driven by insurance sector

Hong Kong, May 6 2015 – Despite near 20 million sf of space being completed in the region in the first quarter of 2015, vacancy rates remained well under control, increasing by just 0.4 percentage points to 9.9%. In the core markets, demand for space increased by over 20% – the insurance sector was the stand-out performer here, accounting for over 40% of the major leases inked, with the bulk of the leases signed evident of a flight-to-quality trend.

In Singapore, the completion of CapitaGreen has seen a number of blue-chip tenants moving to the prime grade development while Ace Insurance relocated from a space in the suburbs to take up a 40,000 sf space in Seoul’s Gangnam business district.

“There is an increased propensity of the new Grade A buildings to lease at a faster velocity than lower-grade projects,” said Sigrid Zialcita, Managing Director of Research for Asia Pacific, Cushman & Wakefield. “New buildings in gateway cities such as Tokyo, Beijing, Shanghai, Seoul and even Singapore are reporting very high pre-leasing rates,” she added.

In Tokyo for example, Japan Post Insurance is consolidating its employees in Osaki Bright Tower, inking close to a million sf lease that will see the yet-to-be completed building fully pre-committed. While tenants are moving to these higher-grade facilities because of very competitive rates and efficient workspaces, organic growth is also an important decision catalyst.

With the Southeast Asia region on the brink of economic integration, insurers are generally upbeat on this burgeoning region’s prospects. For instance, life insurer Manulife paid $1.6 billion to local bank DBS for a 15-year exclusive deal to sell its insurance products to the bank’s client base while Berkshire Hathaway-linked Specialty Insurance has obtained a license to operate in Singapore.

“Looking at the employment data for the major cities, we’ve seen the office-using sector continuing to expand. In particular, we’re seeing this in higher take-up levels in the financial sector, which has sat on the sidelines over the past quarters. The technology sector also remains very active across the region, with the likes of Apple and Facebook, benefiting from continuing phenomenal financial performance”, said Miss Zialcita.

This is especially evident in Australia, as the country adjusts to the shifting economic structure, post the mining boom, where demand for office space were the strongest in the non-mining states. Vacancies fell in Sydney, driven by demand across a wide range of companies in the financial, technology and business and professional services sectors. In Melbourne, tenants taking advantage of the softer market are driving absorption in the CBD as they move back into the central business districts.

Overall rents in the region remained on an upward trend from the last quarter of 2014. From a rental standpoint, stronger occupancies are supporting rental gains in financial hubs. In Tokyo, good projects are enjoying a rent premium. Hong Kong is also another example, where rents have started to edge up in Central after languishing for an extended period of time, driven by demand from Mainland brokerages who are back filling spaces that are being vacated by firms relocating to lower cost submarkets.

For the emerging markets, Bengaluru continued to enjoyed strong demand from the technology sectors. During the quarter, Oracle inked a 400,000 sf space in the JP Nagar submarket. However, the strong construction environment in Jakarta and other Tier-2 markets in China and India is certainly supporting higher availabilities in those markets and a modest correction in rates.

“Still, we have had a good start to the year and we are maintaining a positive outlook for the region. Generally, we expect macroeconomic conditions to be generally supportive of the occupier and investment markets”, said Miss Zialcita.

Cushman & Wakefield is the world’s largest privately‐held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and management assignments. Founded in 1917, it has approximately 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has nearly $4 billion in assets under management globally. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at

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