Results for Q1 2019Knight Frank Asia-Pacific Prime Office rental index fell 0.4% quarter-on-quarter in the first quarter of 2019.

Index decline was attributed to continued heightened global uncertainties led by US-China trade tension re-escalation, Brexit and various major elections across the region.

COMMERCIAL RESEARCH

ASIA-PACIFIC PRIME OFFICE RENTAL INDEX

SLOW START FOR ASIA-PACIFIC PRIME OFFICE RENTSHeadwinds from 2018 persists into 2019

The Asia-Pacific prime office markets saw a soft start to 2019 as sentiment continues to be dampened by uncertainties over an unresolved Brexit and the re-escalation of trade tensions between the US and China. For Q1 2019, Knight Frank’s Asia-Pacific Prime Office Rental Index fell 0.4% quarter-on-quarter to a reading of 142.6; on a yearly basis the index remains up 6.2% year-on-year. The quarterly decline continues the growth deceleration trend witnessed over the past few quarters which recorded 2.2% and 1.4% rises in Q3 and Q4 2018 respectively. Of the 20 cities tracked by the index, 15 recorded either stable or increased rents; 2 less than the 17 reported in the previous quarter. Heading into 2019, we maintain our muted growth outlook for the year and expect the rental index to rise between 0 to 3% this year, down from 2018’s 7.7% rise.

Bangkok’s prime office rents rose 6.1% quarter-on-quarter and 11.6% year-on-year on the back of a demand and supply imbalance which has no imminent upcoming supply and tenants continuing to seek high quality space. In Manila, rents were up 3.5% quarter-on-quarter and 9.5% year-on-year as BPO demand continues to remain firm. However, the continued strong growth trend is expected to plateau with 25% of the existing stock expected to come online in the coming years.

Indian office rents were mostly flat in Q1 with Bengaluru and Mumbai rising 0.0% and 0.1% quarter-on-quarter respectively following a strong 2018 performance stemming from chronic undersupply in both markets, solid demand from IT/ITeS tenants in Bengaluru and aggressive co-working expansions in Mumbai. Delhi saw a 1.4% quarter-on-quarter rise in rents, the first growth registered in over 12 months on the back of increasing co-working space demand.

In Australia, Melbourne continues to do well with rents rising 2.8% quarter-on-quarter as limited available space and strong demand from co-working operators who have tripled their footprint over the past 12 months. Sydney rents rose 1.1% quarter-on-quarter as limited supply conditions continue to persist.

Perth rents were flat quarter-on-quarter as the market continues to digest the recent years’ major supply additions. However, with no new additions expected till 2024 and improving net absorption in recent quarters, there is light at the end of Perth’s office tunnel.

FIGURE 1

Prime Office Rental Index

Stock Weighted Asia Pacific Index (LHS) Vacancy Rates (RHS)

Source: Knight Frank Research

Hong Kong’s office rents contracted 1.6% quarter-on-quarter as the tenant decentralization trend gathered steam in the first quarter. With office rents in the financial hub near its historical peak and tight vacancy conditions, large tenants are forced to either consider fringe CBD areas such as Quarry Bay and/or reconfigure their existing spaces.

In mainland China, office rents contracted 1.4% and 2.1% quarter-on-quarter in Beijing and Shanghai respectively as tenants held back major leasing decisions amidst expected slower economic growth from the US-China trade tensions, landlords being flexible on asking rents to secure tenants and supply concerns continuing to weigh on Shanghai.

NICHOLAS HOLTAsia-Pacific Head of Research

“An expected muted start to 2019 as the persistent headwinds from 2018 continue to weigh on market senti-ment. We continue to believe 2019 will be a challenging year for the Asia-Pa-cific office markets with rents likely to see a more muted rise compared to 2018.”

Follow Nicholas at @nholtKF

For the latest news, views and analysis on the world of prime property, visit Intelligence

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Rental Decline - Slowing Rental Growth - Accelerating Rental Growth - Slowing Rental Decline - Accelerating

ASIA-PACIFIC RESEARCHNicholas Holt Asia-Pacific Head of Research +86 10 6113 8030 nicholas.holt@asia.knightfrank.com

Justin Eng Associate Director, Asia-Pacific Research +65 6429 3583 justin.eng@asia.knightfrank.com

ASIA PACIFIC GLOBAL CORPORATE SERVICESTim Armstrong Head of Occupier Business Development +65 6429 3583 tim.armstrong@asia.knightfrank.com

Josephine Lee Director, Regional Business Development +65 6429 3599 josephine.lee@asia.knightfrank.com

© Knight Frank 2019 - This report is published for general infor-mation only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no re-sponsibility or liability whatsoever can be accepted by Knight Frank for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a gener-al report, this material does not necessarily represent the view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank to the form and content within which it appears.

Knight Frank Research Reports are available at KnightFrank.com/Research

ASIA-PACIFIC PRIME OFFICE RENTAL INDEX

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

FIGURE 2

Asia-Pacific Prime Office Rents

Markets City Submarket(s) Prime Net Headline Rent Local Measurement^ 12-month % change

(Q1 2018- Q1 2019)3-month % change (Q4 2018 - Q1 2019) USD/sq m/month

Gross Effective Rent**

USD/sq m/month

Forecast next 12 mths

Aust

ralia

Brisbane CBD 602.0 AUD/sq m/annum (Net Floor Area) 2.9% 0.3% 36.2 29.9

Melbourne CBD 656.0 AUD/sq m/annum (Net Floor Area) 17.1% 2.8% 39.5 39.1

Perth CBD 591.0 AUD/sq m/annum (Net Floor Area) 0.7% 0.0% 35.6 29.0

Sydney CBD 1,122.5 AUD/sq m/annum (Net Floor Area) 8.3% 1.1% 67.6 63.9

East

Asi

a

Tokyo* Central 5 Wards 38,733.0 JPY/tsubo/month (Net Floor Area) 10.6% -1.9% 103.0 99.3

Beijing Various 375.7 CNY/sq m/month (Gross Floor Area) -1.1% -1.4% 54.7 80.5

Guangzhou CBD 192.6 CNY/sq m/month (Gross Floor Area) 2.5% 0.0% 28.0 47.3

Shanghai Puxi, Pudong 289.0 CNY/sq m/month (Gross Floor Area) -1.0% -2.1% 42.1 64.0

Hong Kong Central 161.1 HKD/sq ft/month (Net Floor Area) 3.2% -1.6% 221.5 223.3

Taipei Downtown 2,760.0 TWD/ping/month (Gross Floor Area) 1.8% 1.0% 27.4 41.6

Seoul CBD, GBD, YBD 33,822.0 KRW/sq m/month (Gross Floor Area) -0.2% 0.2% 30.5 75.4

Indi

a

Bengaluru CBD 1,495.0 INR/sq ft/annum (Gross Floor Area) 17.0% 0.0% 18.5 31.2

Mumbai BKC 3,603.6 INR/sq ft/annum (Gross Floor Area) 5.0% 0.1% 44.6 75.1

NCR Connaught Place 3,960.0 INR/sq ft/annum (Gross Floor Area) 1.4% 1.4% 49.0 82.5

ASEA

N

Phnom Penh City Centre 23.6 USD/sq m/month (Net Floor Area) 0.6% 0.5% 23.6 30.8

Jakarta CBD 4,201,308.0 IDR/sq m/annum (Semi-Gross Floor Area) -16.0% 0.0% 23.4 29.3

Kuala Lumpur City Centre 5.8 MYR/sq ft/month (Net Floor Area) -1.4% -0.3% 15.1 18.1

Singapore Raffles Place, Marina Bay 10.31 SGD/sq ft/month (Net Floor Area) 23.7% 1.5% 81.2 93.5

Bangkok CBD 1,144.0 THB/sq m/month (Gross Floor Area) 11.6% 6.1% 35.4 39.2

Manila Various 1,078.8 PHP/sq m/month (Net Floor Area) 9.4% -3.5% 20.0 23.2

Source: Knight Frank Research / *Sanko Estate ̂ Based on net floor areas for except for China, India, Korea, Taiwan, and Thailand (gross) **Inclusive of incentive, service charges and taxes. Based on net floor areas.

FIGURE 3

Prime Office Rental Cycle

New Frontiers – 2019 The Wealth Report – 2019

Malaysia Commercial Real Estate Investment Sentiment Survey – 2019

Greater China Hotel Report – 2018

Increase No Change Decrease

Kuala Lumpur

Jakarta

BrisbaneBengaluruMumbaiGuangzhouPerth

BangkokMelbourneSingapore

Hong KongManilaNCRTaipeiSeoulSydney

Phnom PenhShanghaiTokyoBeijing

Source: Knight Frank The diagram does not constitute a forecast and is intended only as an indicative guide to current rental levels.Rents may not necessarily move through all stages of the cycle chronologically.