Mr. Andrew Haskins, Colliers’ Asia Head of Research, commented: “Among Asia’s leading financial centres, the relationship between the stock market and Grade A office rents in CBDs is strongest in Hong Kong, followed by Seoul, weaker in Shanghai and Singapore, and weakest in Tokyo.”

Colliers Findings at a glance:

• Hong Kong CBD office rents to see 4% fall in 2019
• Seoul’s Grade A rents vulnerable to market weakness
• Shanghai forecast to withstand market shocks
• Singapore, Tokyo office markets likely to show moderate growth

Hong Kong

Finance sector tenants occupy 54% of Grade A office space in the CBD, and financial stocks have a 48% weighting in the Hang Seng Index. The strong relationship between the stock market and rents over time leads to a forecast of a 3.8% drop in rents in the Central/Admiralty districts in 2019. Average citywide rents in Hong Kong should be flat in 2019.

Seoul

Financial sector tenants occupy 36% of Grade A offices in Seoul’s CBDs, and the finance sector has a 20% weighting in the KOSPI. Seoul shows the second closest relationship between stock market performance and office rents, after Hong Kong, and as a result the risk to our already cautious rent forecasts for Seoul’s CBDs is likely on the downside.

Shanghai

The financial sector represents 31% of the Shanghai Composite Index and 42% of Grade A offices in the CBDs. However, the relationship between stock market performance and rents is low and therefore the city’s office market is expected to withstand financial shocks. Colliers predicts 1.5% average annual citywide rental growth during 2018-2022.

Singapore

The financial sector represents 43% of the Straits Times Index and occupies 45% of grade A offices in the CBDs. Given the relatively weak relationship between stock market performance and office rents in Singapore, and the present situation of tight vacancy and muted supply, Singapore’s CBD rents are expected to continue to grow by 8% in 2019 and 5% in 2020.

Tokyo

The financial sector has a 12% weighting in the TOPIX and occupies 8% of Grade A office space in Tokyo’s CBDs. The correlation between the TOPIX and rents is very low. We expect Tokyo’s office market to continue its recovery with rent growth peaking at about 4.5% YOY within the next several quarters before tapering down to a more sustainable annual growth rate of 0.8%.

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Get to know Nigel Smith, Managing Director of Colliers International Hong Kong