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Gordon Marsden: The future of office investment in Asia Pacific

Gordon Marsden • 06/12/2022

With the recent rise of alternative investments, office seems to be losing favor with investors. What do you think the future of office investment will look like?


Asia Pacific is home to 60% of the world’s population and is the only region that has recorded positive office net absorption every quarter over the past decade – even during the COVID-19 pandemic. Looking ahead, Moody’s Analytics forecasts that an average of 2.2 million new office jobs will be created in Asia Pacific each year, compared to only 0.3 million in Europe or the United States. With this strong office job growth, occupier demand in Asia Pacific will be substantial, and investors will follow where occupiers go.

Investment-wise, office is still the largest transacted asset class in Asia Pacific, accounting for roughly 45% of total income-producing property investments over the first nine months of 2022. Comparatively, office investments in the United States only accounted for 16%, according to MSCI. Many Asia Pacific countries are still creating new fit-for-purpose office stock, so access to office development returns is also an investment strategy that continues to have support.  

Part of the office sector’s attraction is its diversity: its diversity of geography – within the city or into suburban areas – the roles it fulfills, and who occupies it. The most repeated comment today referencing the office sector and its position in building “the portfolio of the future” is that you can pick office buildings with “new economy” tenants. 

Among the 42 major office markets in Asia Pacific, we have seen diverse rental trends. Markets with the strongest rental growth within the past 12 months are Sydney, Melbourne, Singapore, Seoul, HCM city, Hanoi, and selected cities in India, which have all recorded a y-o-y rental growth of above 5% as of Q3 2022. While the upcoming economic headwinds could mean slower rental growth in the next 6 to 12 months, we think in the mid- to longer-term, the region’s robust infrastructure development and strong office job growth will continue to drive upward rental growth in many of the Asia Pacific office markets.    

When we further think about the drivers of growth in the cities we track, we must be mindful of the distinction between the basket of assets that meet the ESG and space upgrade requirements demanded by tenants where this rental growth is concentrated, and a deteriorating outlook (brown discount) for assets being “left behind”. In addition, while operations needed to manage an office building have been viewed favorably compared to other asset classes in the past, the operational intensity driven by the demands and expectations of tenants is going to increase substantially – notwithstanding improved “Prop Tech” and more sophisticated BIM systems (or similar). 

Last but not least, Asia Pacific currently remains fundamentally under-allocated in global capital markets. We believe that once there is more clarity on the macroeconomic front, investment will return, and allocation to office will remain as one of the most important sectors in the region, not least because of the ability it provides to deploy significant capital to a single asset. 

These opinions are the author’s own and do not necessarily reflect the views of Cushman & Wakefield. To find out more about how Gordon Marsden views opportunities in Greater China, click his profile and get in touch.

For more on investment opportunities across Asia Pacific, visit our Real Estate Investment Hub here.


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