High rentals push offices away from prime sites

Continuous increase in office rentals in Asian financial hubs like Mumbai, Hong Kong and Singapore has driven some companies to shift out of prime locations, a latest report says.

According to real estate consulting firm CB Richard Ellis Research, in India supply remained limited in central business district (CBD) areas, while facilities in secondary locations have attracted office occupiers due to superior availability.

"Although absorption of office space remained brisk in most markets, continuous increases in occupancy costs have driven some companies to relocate beyond prime locations in cities including Tokyo, Hong Kong, Singapore and Mumbai," CB Richard Ellis Chairman and MD (South Asia) Anshuman Magazine said.

Meanwhile, corporate expansion continued in many parts of Asia despite increasing uncertainty in the global economic outlook and business sentiment remained largely positive due to expectations that leading Asian economies would outperform the US and Europe, the report stated.

Overall in the Asian office markets space, an ongoing supply crunch continued to exert upward pressure on rentals during the first quarter of 2008. In New Delhi, prime office rentals remained stable in the first quarter of 2008 and are expected to remain at current levels or increase marginally.

New supply is expected to continue to be dismal in the CBD, while the supply situation in the peripheral areas of Gurgaon and Noida is set to improve as a significant amount of supply is set to enter the market over the remainder of 2008 and into 2009, the CBRE research report said.