Booming Asia’s Office Rental Properties

Globalization combined with the transmission mechanism of the US Federal Reserve’s policies compounded by domestic ‘low interest rates’ monetary policies has been fuelling a boom in Asia’s office rents—which should also reflect on an ongoing boom in the property (sale) sector.

From Bloomberg,

Office rents in the Asia-Pacific region increased at about double the global pace in the third quarter as China’s economic expansion fueled demand for commercial real estate, Jones Lang LaSalle Inc. (JLL)said.

Rents for the highest-quality office space in the region increased 10.5 percent from a year earlier, the Chicago-based broker said yesterday in a report. That compared with a global growth rate of 5.5 percent.

Cities in Asia, including China’s financial hub Shanghai, Perth in Australia’s mining heartland and the technology center of Bangalore in India, had some of the highest levels of annual rental growth, Jones Lang said, as economic expansion in the region outpaces the U.S. and Europe. The Americas had a 2.6 percent advance, while rents in Europe rose 4.4 percent.

“Most major markets are in better shape than they have been since 2008, but investors and corporations are unsettled by current economic uncertainties,” Arthur de Haast, head of Jones Lang’s international capital group, said in the report. “Appetite for risk has diminished,” he said, prompting investors to focus on buildings that already have tenants.

Beijing rents soared 50.6 percent year on year, the most in the Asia-Pacific region, followed by Jakarta with 48 percent and Perth with 26.9 percent because of demand from China for Australia’s commodities. Beijing, Jakarta and Perth also had the largest quarter-on-quarter increases, according to the report.

Prime office rents in the 81 markets researched by Jones Lang rose by 1.1 percent during the quarter from the previous three months. Overall rents increased for the seventh consecutive quarter and they are up 8.2 percent since the bottom of the market in the fourth quarter of 2009, Jones Lang said.

The average global office vacancy rate is 13.8 percent, the lowest in two years, according to the broker.

As the great Murray N. Rothbard wrote of the causes of economic depression (Austrian Business Cycle)

Businesses, in short, happily borrow the newly expanded bank money that is coming to them at cheaper rates; they use the money to invest in capital goods, and eventually this money gets paid out in higher rents to land, and higher wages to workers in the capital goods industries. The increased business demand bids up labor costs, but businesses think they can pay these higher costs because they have been fooled by the government-and-bank intervention in the loan market and its decisively important tampering with the interest-rate signal of the marketplace.