India and Australia drive APAC office rental growth in Q1

Prime office rents in the region rose 0.8% during the quarter.

Asia-Pacific’s prime office markets continued to firm in Q1 2026, with rents rising 0.8% quarter-on-quarter despite renewed geopolitical volatility, according to Knight Frank.

Knight Frank’s latest Office Highlights report showed that 18 of 24 monitored cities recorded stable or increasing rents, up from 17 in Q4 2025, reflecting resilient occupier demand for high-quality space. The firm said this points to a strengthening market, with tenants acting more decisively to secure prime offices even as macro risks persist.

India and Australia were key drivers of regional growth. Bengaluru led the region with rents rising 14.0% year-on-year, supported by strong demand from Global Capability Centres, which accounted for 41% of leasing activity in the city. Mumbai also recorded a quarterly leasing high of 520,000 sq m, signalling broad-based expansion across occupiers.

In Australia, prime net effective rents increased 8.4% year-on-year, accelerating from 5.9% in the previous quarter. Sydney and Brisbane led gains with rental growth of 8.6% and 8.2% respectively, underpinned by a near absence of new supply.

North Asia also showed strength. Prime rents in Hong Kong’s Central district rose 5.4% quarter-on-quarter, supported by financial and legal sector demand amid a buoyant IPO market. Tokyo remained one of the tightest office markets globally, with vacancy falling to a record low of 1.1% and rents climbing 8.9% year-on-year, as high construction costs and labour shortages continue to constrain new supply.

Regionally, vacancy tightened for a second consecutive quarter to 14.1%, although Knight Frank expects this to increase to between 16% and 18% as nearly 10 million sq m of new office space is delivered in the near term.

The report noted that escalating conflict in the Middle East has added uncertainty, with oil prices surging more than 40% month-on-month in March toward US$120 per barrel. However, occupier sentiment across Asia-Pacific has remained broadly stable. While some firms may delay leasing decisions in the short term, Knight Frank said constrained development pipelines mean such caution may be difficult to sustain.

Tim Armstrong, Global Head of Occupier Strategy and Solutions at Knight Frank, said occupiers are increasingly prioritising high-quality, future-ready offices that support talent attraction and operational resilience. He added that rising energy costs are reinforcing demand for efficient, well-located buildings, strengthening the “flight-to-quality” trend.

Christine Li, Head of Research, Asia-Pacific at Knight Frank, said policy stability and limited adoption of work-from-home arrangements in most markets are supporting leasing demand. She added that the balance between constrained supply and steady occupier demand will remain a key driver of market performance, although cost pressures may weigh unevenly across sectors.

Notable leasing transactions during the quarter included major deals by JP Morgan, Smartworks and SBI in India, as well as commitments from Deloitte in Beijing, DJI in Shenzhen and La Trobe Financial in Melbourne, highlighting continued expansion and relocation activity across the region.

Knight Frank expects prime office fundamentals to remain supported in the near term, with supply constraints and occupier preference for quality space underpinning rental growth across Asia-Pacific.