APAC Office Outlook

From a demand perspective, the top eight Indian real estate cities have led the region in net office absorption over the past 18 months, fuelled by both expansion of domestic companies and the ongoing growth of global capability centres, predominantly in technology-focussed cities. This leading position is not expected to be challenged over the forecast horizon, with net absorption forecast to average approximately 40 msf per annum, equivalent to around 52% of the regional total.

The recovery in mainland China’s tier one cities is also expected to continue. Office demand in these four cities (Beijing, Shanghai, Guangzhou and Shenzhen) is expected to end 2023 at a little over 13 msf, a 20% improvement on 2022, then accelerate to almost 18 msf in 2024 and remain around 20 msf per annum for the remainder of the forecast period.

Some markets across Southeast Asia are also forecast to experience a strong uptick in demand. Kuala Lumpur and Manila, with their expansive national economic growth outlooks, stand out, while Singapore is likely to continue its steady performance as its economy rebounds.

Elsewhere, Tokyo is starting to emerge from a comparatively slow 2021–22 period, with demand in 2024 forecast at 5.3 msf—the highest level of net absorption in several years. Supply-led demand, however, remains a key driver as tenants relocate to higher quality buildings and/or locations.

Figure 4: Regional annual grade A office net absorption (msf) and vacancy rate by broad geography*



* Tier 1 mainland China = Beijing, Guangzhou, Shanghai, Shenzhen India = Ahmedabad, Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai, Pune Rest of APAC = Bangkok, Brisbane, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Seoul, Singapore, Sydney, Tokyo.

Source: Cushman & Wakefield

This remains an important issue across the region. Recent analysis has highlighted the importance of building location and quality in occupier decision-making . Factors such as sustainability and technology accreditation are becoming increasingly important, yet adoption of both  remains at relatively low levels across Asia Pacific. Accordingly, demand is likely to be further bifurcated or even trifurcated, and led by best-in-class buildings in good locations, and/or by those buildings with re-positioning potential.

Despite the positive outlook for office demand, vacancy is expected to continue pushing upwards in 2024 as new supply exceeds demand. While approximately half of the markets forecast are expected to experience higher vacancy in 2027 than 2023, the most significant increases are concentrated in just a few markets. Guangzhou’s vacancy rate increased around 600bps in 2023, from 14% to 20%, and is forecast to rise to almost 30% by 2027. A similar situation is seen in Shenzhen, with vacancy rising from 27% in 2023 to almost 35% in 2027. While these are the largest vacancy rate increases, vacancy rates in markets including Hyderabad, Kuala Lumpur and Bangkok are forecast to exceed 25% by 2027. This is primarily driven by new supply, as positive office demand is expected to endure in all these markets. Again, this highlights the importance of truly understanding tenants’ needs when positioning assets within high vacancy markets.

Singapore and Seoul are likely to remain the tightest markets in the region, with vacancy in both remaining below 5%. Neither Tokyo nor Manila is expected to exceed 7% over the forecast horizon (2027). In Australia, vacancy rates are expected to remain stable at around 10%, though this is likely to tighten in Brisbane and Sydney toward the end of the forecast horizon as supply pipelines dry up.

Figure 5: Net absorption (msf) and vacancy rate, 2023-27



Source: Cushman & Wakefield

Bringing these factors together suggests that there will be comparatively little upward pressure on rental growth over the near-term at the aggregate level. However, this is not universally true at the local level, and in almost all markets there remains a bifurcation with higher-quality stock likely to outperform the wider market and the the vast majority of poorly located, lower-quality buildings likely to remain under significant pressure.

Sub-regionally, recent performance has been varied. Australian markets have led rental growth across the region in 2023, topped by Brisbane. Together with Sydney and Melbourne, these three markets are forecast to show the strongest growth through to 2027, averaging around 4% to 7% per annum. Jakarta’s forecast rental increase over the same time is similar, though this is predicated on strong growth from 2025 which would need to come to fruition to offset slower growth in the near-term. In Singapore, steady growth of around 4% per annum is forecast from 2025 onwards, fuelled by strong demand, limited supply and already-tight vacancy.

Rental growth elsewhere in the region is more muted. Soft conditions in the near-term remain prevalent across tier one markets in mainland China. Rents in Tokyo are expected to remain flattish with minor downside risk expected until 2027.

Figure 6: Rental outlook by market, 2024 (% y-o-y) and 2023-27 (% per annum)



Source: Moody’s Analytics