Prime office rents to further rise in Beijing, Shanghai

Fewer vacancies in Beijing and Shanghai and the presence of strong occupational demand will lead to a continued rise in their prime office rents in 2014, said a report released by property service DTZ Research on Tuesday evening.

The trends of prime office rents will keep tenants in both cities under pressure to control costs. In contrast, tenants are in a much stronger position in second-tier cities where massive new construction and rising vacancy levels will continue to suppress rental growth and create opportunities for flight to quality and market repositioning, the report said.

In China, core markets will remain the focal point for investors, providing both more investable stock and better prospects for rental growth than second-tier markets, the report said.

"Asia-Pacific has a significantly improved macro and property market sentiment. But, we do need to remember that its average occupancy cost increase is the highest of any region globally, with little room for improved efficiency in most markets," said Hans Vrensen, global head of research at DTZ and lead author of the report.

Tenants need to be more focused on operational flexibility to improve global competitiveness. Investment markets have become more fully priced, but remain attractive, said Vrensen.

However, there is limited time to take advantage of this attractive pricing, as interest rate rises are looming. Asia-Pacific investors need to be bold and focus on liquidity regardless of geographic focus. This can be both on acquisitions overseas and disposal within the region, according to Vrensen.