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Office market in Asia Pacific slows down amid global financial turmoil

In 4Q 2008, the office market in the region saw a significant slowdown due to a dramatic retreat of new demand and the fact that many existing office occupiers have determined to rationalise their resources by streamlining their workforce and reducing their recurrent outgoings.

"Despite no major new supply, a number of office centres recorded a rise in available stock as more sub-lease space returned to the market," noted George McKay, Managing Director, Corporate Services of Colliers International, Asia Pacific Region.  The falling office rentals registered an average negative growth of 4% quarter-on-quarter (QoQ) during 4Q 2008.  "Meanwhile, individual centres with a tenant profile highly geared toward the financial sector have experienced steeper rental corrections in the order of over 10% QoQ," added George.

On the sales front, the overall number of investment deals contracted and the key obstacle remained the lack of sufficient financing from banks in 4Q 2008.  In the Greater China region, the highlight was a significant number of strata-title sales in the Finance Street in Beijing, which were concluded by local companies.  In the case of private investors, a significant transaction in Auckland was the sale of Ricoh House and Hawkins House by the Goodman Property Trust to a private family for a total consideration of US$12.5 million.

"Given the projection of a continued global economic consolidation in 2009 and the sustained trend of cost-cutting measures adopted by the bulk of office tenants, occupational demand in the region is predicted to slow further," concluded George.  "However, individual centres with existing low vacancy rates and those new developments coming on stream that have a high pre-commitment rate could be more resilient to the threat of a global slowdown in 2009."