Southeast Asia's office market bullish

Southeast Asia's office market bullish

SINGAPORE (AFP): Prospects for Southeast Asia's office development market are bullish amid aggressive government campaigns to boost financial and business services sectors, an Asian property conference was told yesterday.

"Current incentives to attract big banks, insurance firms, investment funds and others from outside the region are going to have an impact on the office sector because they need space," said Amos Koh, Singapore-based managing director of European property consultancy DTZ Debenham International.

Koh told the Asia Property '95 conference here that many Southeast Asian governments even encouraged the development of office buildings, as they provided attractive incentives to lure big capital-market players.

"This is going to have a cumulative effect because, say, if one or two major banks set up shop in one capital, the other big boys will follow and demand for office space is going to increase," Koh said.

The two-day conference, attended by property and real estate executives from the region, was told that Malaysia, Thailand and Indonesia wanted to develop their own capital cities as financial hubs to join the big league in Asia.

Manila was also expected to experience a strong office sector in line with an economic resurgence, recently-packaged investment incentives and new industrial development schemes.

Koh said that over the past nine months, office rents in Manila rose by an average 10 percent because of a shortage of space, while in Bangkok rentals have recovered from the substantial decline that started in early 1994.

In Jakarta, rents climbed back up to an average US$16 a square metre (10.76 square feet) in late 1994 at the central business district in the Golden Triangle and have hovered at that level since.

An oversupply of space there since late 1993 had led to a drop in rentals from $24 to $13 a square metre, he said.

For Kuala Lumpur's central business district office rents, Koh predicted some decline over the medium term because of large space arising from the development of the mammoth Kuala Lumpur City Center and other projects as well as downtown traffic congestion.

But Malaysia's strong economy would underpin a steady take up rate for much of the new central business district space, he said.

"This is not just bullish talk. It is becoming clearer over the last two years that (as an) alternative to Singapore, many Hong Kong firms are looking at Kuala Lumpur to relocate or set up branches -- they are not financial but more manufacturing-based companies," Koh said.

Singapore's rise in office rents was the sharpest over the past year -- by about 25-to-30 percent for central business district premises -- largely due to an unprecedented demand growth as well as relatively little new space expected over the medium term.

Eric Levy, president of hotel brokerage firm Horwath Hotel Partners, told the conference that many Asian businessmen were buying up hotels in the United States because the acquisition cost was less than that required to build new property.

"The greatest pull now for such property is in the US despite the recent economic recovery," he said. Most of the US hotel buyers were from Singapore, Thailand, Hong Kong and Taiwan.