Asia Pacific office rental rates remained stable in the first quarter of 2013, on the back of cautious occupier behaviour and the subdued economic outlook, according to the latest figures from international property agents CBRE.

Net absorption totalled 650,000 square metres, the same figure as the previous quarter. Japan “witnessed a noticeable improvement in occupier sentiment following the election of the Liberal Democratic Party,” while Hong Kong was the only market to record negative absorption due to the release of large amounts of secondary space in the market.

The CBRE Asia Pacific Office Rental Index —which tracks office rental growth for the region—recorded marginal growth of 0.05 per cent over the third quarter of  2012, reflecting the relatively flat rental cycle found for the past six quarters.

Rental performance across the region continued to diverge, with Bangkok and New Delhi recording strong rental gains, while others such as Bangalore and Mumbai witnessed declines.

However the company says demand from international occupiers looking to enter Cambodia remains strong. More established businesses are continuing to drive the market through expansion requirements, either taking extra space within their existing offices, or relocating in search of more floor space.

Transactions in the 50-100 square metre range will continue to dominate, much as they did in 2012, especially for logistic and manufacturing companies arriving from countries such as Korea, Japan and China.

However CBRE says the majority of office space in Phnom Penh is still low-grade, in terms of international standards.

The prime-rent index across Phnom Penh shows an annual growth of 3 per cent, with further prime rental growth expected toward the end of 2013.

Increasingly, international businesses are favouring Phnom Penh, mainly due to the stable economic growth and the integration with ASEAN in 2015.

Across the region, vacancy declined in 13 markets, increased in four and one was flat. Notably, Hong Kong witnessed a rise in rates to 3.3 per cent, largely due to space returning in the market, while vacancy notably fell in Kuala Lumpur, amid strong expansion activity in the oil & gas and financial sectors. In Tokyo, vacancy has continued to decline since last quarter due to increased activity by manufacturers.

“Rental growth is expected to remain flat due to continued caution by occupiers in the short-term. Leasing activity will largely be geared around cost saving, with a focus on consolidation and relocation,” Dr Nick Axford, executive director and head of CBRE Research, Asia Pacific commented. “Domestic and regional conglomerates will continue to account for the majority of leasing transactions.”

John Falkiner, managing director of transaction services also commented: “We expect to see steady leasing activity in most markets over the next quarter and demand should recover slightly in the second half of the year with the exception of key markets such as Singapore, Beijing, Melbourne and Sydney. Further, we expect to see upgrading activity in markets such as Tokyo where rents have bottomed out.”