In the latest CB Richard Ellis report released today about office space in Asia, there is evidence that the office space market in general is stabilising and recovering.

The opening quarter of 2010 saw robust office take-up in Asia’s major commercial centres as companies have become more willing to commit to space at the current rentals. Corporate occupiers are taking advantage of the fact that office rents have generally experienced downward correction for over a year in most markets, and some are availing themselves of this opportunity to upgrade their premises to Grade A facilities. At the same time, Asia’s overall business sentiment was buoyed by the continued improvement in the regional economy. The labour market has also tightened, with the unemployment rate clearly tracking downwards in most markets and large-scale companies announcing recruitment plans.

Recovery of demand in the office sector was reflected by the growth in the net absorption level for the whole region, which was recorded as 31% higher than the figure recorded in the last quarter, and most cities surveyed recorded positive absorption of office space. The first quarter saw overall vacancy for Asian cities decline 80 basis points quarter-on-quarter to 11.8%. The quarter was also characterised by stronger performance in the Grade A market as compared to the Grade B sector as occupiers started a new round of flight-to-quality activity to lock in leases with favourable terms while conditions still permit. Landlords took a firmer stance towards rental levels as the market started to see stronger demand amidst the improvement in the economic environment. Overall office rents in Asia fell 0.1% in the first quarter, this representing a marked decline from the 1.9% percent deceleration recorded in the previous quarter.

Cities in the Greater China region exited the downward rental cycle somewhat earlier than cities in the Asian region. Beijing, Shanghai, Guangzhou, Hong Kong and Taipei all recorded quarter-on-quarter growth in office rentals. India’s leading commercial centres also saw further signs of office rentals bottoming out, with a number of prime office districts in the National Capital Region and Mumbai starting to record signs of rental recovery.