Guess which three cities drove office rental growth in Southeast Asia in Q1

Office rents in the region rose by 1.3% during the quarter.

Southeast Asia's emerging office markets have shown steady growth in the first quarter of 2025, with average rents rising 1.3% quarter-on-quarter, according to Knight Frank’s latest Asia-Pacific Prime Office Rental Index for Q1 2025.

This positive momentum was primarily led by notable increases in Jakarta, Kuala Lumpur, and Bangkok, signalling improving regional conditions in the face of shifting regional dynamics.

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After experiencing nearly two years of sustained rental declines since mid-2023, Jakarta's office market is poised for a significant turnaround this year. This is attributed mainly to diminishing new supply entering the market, creating a more favourable supply-demand balance that should stabilise rents and gradually reduce vacancies.

Bangkok's prime office sector thrives as tenants increasingly prioritise high-quality, amenity-rich environments. Meanwhile, Kuala Lumpur has benefited from tech firm expansions and multinational corporations strengthening their regional presence, steadily improving occupancy rates.

Tim Armstrong, global head of occupier strategy and solutions, Knight Frank says, “As companies re-assess their occupational footprints, we expect occupiers to delay significant real estate decisions due to tariff uncertainties. This trend is driving a stronger focus on lease renewals, particularly for those who have moved into higher-quality buildings in the past few years and prompting occupiers to explore flexible spaces and shorter lease terms. While the ongoing uncertainty complicates long-term decision-making that will likely weigh on occupier sentiment in the near term, we believe India and emerging Southeast Asia will remain resilient, as occupiers diversify their operations to navigate the new landscape.”

Key highlights from the Q1 2025 report:

• 17 of 23 monitored cities across Asia-Pacific reported stable or increasing rents year-on-year, up from 16 in Q4 2024.
  Indian markets set an unprecedented quarterly leasing record of 1.7 million square meters, representing 94% year-on-year growth. Global Capability Centers drove transactions, with 65% of all leases concentrated in Bengaluru.
• Seoul's prime office market recorded 17 consecutive quarters of growth a 6.9% year-on-year rent increase and the region's lowest vacancy rate at 1.8%. This strength stems from demand in the financial sector and limited CBD space. However, after three years of above-inflation rental growth, tenant fatigue is emerging, with major occupiers exploring relocations to secondary districts to reduce costs.
• Vacancy rates across the region remained largely unchanged despite the delivery of 1.3 million sqm of new supply, as tightening availabilities in India and Southeast Asia offset these additions.

While prime rents in broader Asia-Pacific fell 0.9% quarter-on-quarter compared with 0.4% in Q4 2024, with conditions in the Chinese mainland's tier-one cities remaining challenging and rental growth cooling in Australia, the region's overall outlook remains positive.

Brisbane continues to lead the region in annual rental growth, though signs of stabilisation are emerging, with prime office rents rising by just 0.5% quarter-on-quarter. This moderation follows a period of sustained strong rental increases and elevated fit-out costs, prompting many tenants to prioritise lease renewals over relocations. The limited pipeline of new office supply, combined with strong tenant demand, is expected to renew the phase of stronger rental growth beyond 2025.

Singapore's prime office rents remained unchanged quarter-on-quarter as occupiers increasingly consider cost-neutral options, including right-sizing and relocating to more modern facilities.

Christine Li, head of research, Asia-Pacific, Knight Frank, says, “Landlords prioritising occupancy levels and retaining tenancies, in the face of global economic uncertainty, have kept vacancies largely flat in the region. However, this has come at the expense of softer rents, which were observed to have fallen at a faster quarter-on-quarter in Q1 2025. Excluding the Chinese mainland markets, rental growth has also decelerated. While the Trump administration has announced a 90-day pause on the reciprocal tariffs, trade tensions continue to be elevated. This sudden retreat only underlines the unpredictability ahead and the lack of visibility will continue to hang over occupiers’ ability to set long-term real estate decisions. Against this volatile backdrop, landlords will be compelled to remain accommodative on rents to secure tenancies.”