The market for offices by financial institutions will be
strong this year in countries such as China,
Indonesia and India, whereas
consolidation of firms and slower growth in more developed locations paints a
slower picture elsewhere, according to property consultants and research firm
Cushman & Wakefield.

The firm’s briefing on the state of the Asia-Pacific real
estate market for offices used by banks shows a contrast between the buoyancy of
Chinese cities such as Shanghai and the more
muted look to centres such as Sydney and Tokyo.

One force cooling demand for offices is “consolidation” -
firms shrinking some of their workforces, merging unit and cutting risk
exposures in the wake of recent financial strains, the report said. Staff cuts
are reducing demand for office space in locations such as Hong
Kong, it said.

By contrast, cities in India
and Indonesia
are stronger. “These growth markets will continue to be the focus of the
industry’s expansion efforts in the near to medium-term as developed markets
face weaker growth, tightening regulations and operational streamlining,” the
report said.

In Hong Kong, for example, the Cushman & Wakefield
report noted – as previously reported by this publication – the dramatic fall
in the number of initial public offerings on the jurisdiction’s stock market last
year (a fall of 78 per cent), which weighed on the financial sector and its associated
demand for office space, leading to more space becoming available.

“Several investment banks and securities firms, which were
relatively new to the Hong Kong market, have
faltered over the past year,” the report said. In the case of Singapore,
meanwhile, the report noted that its banks faced more headwinds last year amid
tighter lending margins and slowing loan growth. In that climate, demand for
office space fell 26.5 per cent in the first nine months of 2012 from the year
before, to 1.69 million square feet.

By contrast, China’s
economic rebound from a period of decelerating growth, coupled with foreign
banks’ determination to push into the market, have driven demand for offices. In
Beijing, for
example, the vacancy rate in the city’s financial district is at the “extremely
low level of below 2.0 per cent”, the C&W report said. The report reckoned
that supply of office space will remain at historic lows for the next three
years. In Shanghai,
the vacancy rate was 3.3 per cent at the end of the third quarter of 2012, a
fall from a year before.

“The overall financial sector [in China] is still in a
relatively healthy state and progressing towards a more mature phase,” it said,
adding that the new Qualified Foreign Institutional Investor regulation, issued
in July last year, allows more smaller foreign investors, private equity funds
and other bodies to enter the market, ensuring that financial firms continue to
help drive real estate.