CONTACT US
Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting cushmanwakefield.com to read:%0A%0A {0} %0A%0A {1}

72% of office stock across Asia Pacific will not meet the needs of top corporate tenants

Amy Kathleen Kelly • 22/06/2023
  • Risk of office obsolescence is rising around the world

  • Only 28% of existing office stock in Asia Pacific is both prime grade and holds sustainability accreditation

  • However, Asia Pacific more resilient than other regions thanks to younger prime building stock, jobs growth forecast

Office stock in Asia Pacific faces a lower risk of obsolescence than that in Europe or North America, but the ongoing flight to quality and growing focus on sustainable buildings could shorten the timeline available for investors and landlords to optimise their assets.

A new report by Cushman & Wakefield (NYSE: CWK) showed that approximately half of the region’s existing office stock is secondary grade while only 43 percent of the prime-grade stock has any form of sustainability accreditation. This means that approximately 28 percent of existing stock meets specification for top corporate occupiers; the remaining 72 percent will require some form of optimisation to remain relevant.

Sister reports launched by Cushman & Wakefield show that 85 percent of office buildings in the United States and 76 percent in Europe either risk obsolescence or will require some form of repositioning in order to remain relevant. The drivers are different: in the US, low return-to-office rates, weaker office jobs growth and the densification of workplaces, exacerbated by new supply, means 1.1 billion square feet (sf) of excess office space is predicted by 2030. In Europe, sustainability legislation that stipulates minimum energy requirements be met before a building can be leased has accelerated the risk of obsolescence caused in part by an ongoing flight-to-quality and made more pronounced by the rise of hybrid and remote work.

The Asia Pacific report, ReThinking The Office Sector: Optimising Your Asset for a New Era considers factors including the average age of prime office assets, the percentage of prime stock to total stock within a market, return-to-office rates, sustainability accreditation and employee density benchmarks when weighing up the risk of obsolescence for 10 key markets1 across Asia Pacific. It also shows tailwinds for the Asia Pacific market are likely to lessen the risk of obsolescence seen in other regions.

Head of International Research Asia Pacific and report author Dr Dominic Brown said: “Asia Pacific’s growth drivers include the creation of almost 15 million new office jobs by 2030, a higher return-to-office rate than other parts of the world, potential de-densification of workspaces and younger office business districts. These factors will provide a buffer against some of the more severe headwinds felt in other regions.”

However, Brown highlighted that the evolution of working styles and the introduction of sustainability legislation witnessed in the US and Europe could shorten the time available to investors to either reposition (upgrade) or repurpose (find a new use for an asset or site) their Asia Pacific assets to retain their valuation.

“Repositioning scenarios can range from obtaining the certifications needed to meet minimum environmental standards through to extensive refurbishment. In all cases, staying ahead of, or at least keeping pace with, occupier demand and sustainability legislation in each market is necessary for an asset to remain relevant.”

Head of Investor Services for Asia Pacific and Europe James Young said: “The risk of office obsolescence, or at least the need to reposition assets, is rising across the world. Asia Pacific is currently benefiting from stronger office job creation and GDP forecasts than other regions, but all indicators show a clear and growing occupier preference for higher quality, better amenity stock.

“This occupier flight-to-quality has resulted in the top grade of office stock accounting for more than half of the total office demand in Europe every year since 2019; a similar trend is expected to continue driving competition among occupiers for the approximately 30 percent of sustainability certified, premium office space in Asia Pacific. Investors who reposition their assets stand to benefit from this growing demand for sustainable, prime-grade stock; those who do not will face diminishing returns.

Key findings for Asia Pacific:

  • 50% of office stock across key markets is secondary grade
  • Of the 50% prime stock, only 43% has any form of sustainability accreditation (Figure 1)
  • Regional vacancy is expected to reach more than 18% (390 msf) in 20252
  • The (weighted) median age of prime stock is 16 years; the percentage of prime stock to overall varies by market (Figures 2, 3)
  • The proportion of prime stock with a sustainability rating varies from over 90% in Sydney, Singapore and Melbourne to under 40% in Beijing and Bengaluru.
  • 15 million new office jobs are forecast by 2030 across the region, but primarily in China (accounting for 7.4 million of these new jobs), India and the Philippines.
  • Asia Pacific has a stronger return-to-office culture than other regions, with Greater China at practically 100% and Tokyo at up to 85%.

Figure 1
Figure 1: Approximately 70% of office stock in Asia Pacific will need some form of optimisation to remain relevant to top corporate occupiers.

Figure 2
Figure 2: The weighted median age of prime stock across key Asia Pacific markets is 16 years.

Figure 3
Figure 3: The proportion of prime stock to overall office stock by key market.


Beijing, Shanghai, Hong Kong; Bengaluru, Delhi NCR, Mumbai; Melbourne, Sydney, Singapore; and Tokyo.
Calculated across 25 key Asia Pacific markets

Recent Press Releases

Cititech-Industrial-Building-CardImg
Prime Freehold Strata Industrial Units for Sale at Cititech Industrial Building and Citilink Warehouse Complex

ERA Realty Network Pte Ltd (ERA), Cushman & Wakefield (NYSE: CWK), and JLL (NYSE: JLL) have been jointly appointed as the exclusive marketing agents for the sale of freehold strata light industrial units at Cititech Industrial Building and Citilink Warehouse Complex. 

Nandhini Rad • 08/04/2024

investment sales singapore 2024
Total investment sales could surpass $25.0b in 2024, higher than $19.2b in 2023

According to Cushman & Wakefield’s latest Marketbeat report, Investment volumes are up by 20.9% yoy.

Nandhini Rad • 08/04/2024

Seletar Mall, Singapore
Cushman & Wakefield and JLL Brokered the Sale of Seletar Mall

Cushman & Wakefield (NYSE: CWK) & JLL (NYSE: JLL), as the joint-exclusive marketing agents, are pleased to announce the sale of 100% interest in Seletar Mall, a dominant suburban retail mall located at 33 Sengkang West Avenue (the “Property”).

Nandhini Rad • 07/03/2024

OneTen-Paya-Lebar
Hwa Hong Corporation Limited successfully sells OneTen Paya Lebar

Cushman & Wakefield (NYSE: CWK) and Savills (NYSE: Savills) are pleased to announce that Hwa Hong Corporation Limited, represented by Cushman & Wakefield and Savills, has successfully completed the sale of OneTen Paya Lebar, a rare freehold city fringe data center located in Paya Lebar.

Nandhini Rad • 06/03/2024

hands with puzzle
Cushman & Wakefield and Nuvama Asset Management launch joint venture real estate office fund, aim to raise USD 360 million

Leading global real estate services firm Cushman & Wakefield [NYSE: CWK] and Nuvama Asset Management, the alternatives-focused asset management arm of Nuvama Wealth Management Ltd (NSE, BSE: NUVAMA), have announced the formation of a new investment entity that will facilitate participation into India’s phenomenal real estate growth story.

Amy Kathleen Kelly • 05/03/2024

Serene Centre Singapore
Prime Freehold Mixed-Use Development Serene Centre Sold for $105 million

Cushman & Wakefield, a leading global real estate services firm has today announced the sale completion of Serene Centre (the “Property”) for $105 million. 

 

Shaun Poh • 23/02/2024

LIV@CHANGI building facade
A Freehold Suburban 3-storey Retail Mall at Upper Changi Road Up for Sale via Expression of Interest

Cushman & Wakefield and CBRE, as the joint-exclusive marketing agents, are pleased to offer for sale Liv@Changi, a 3-storey suburban retail mall located at 933 Upper Changi Road North.

Nandhini Rad • 20/02/2024

Citadines Mount Sophia
Citadines Mount Sophia sold for $148 million

Citadines Mount Sophia at 8 Wilkie Road is a 12-storey premier serviced residence, offering 154 apartment suites comprising studios, 1-bedroom and 2-bedroom. 

Shaun Poh • 02/02/2024

With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Privacy & Cookies.
MORE OPTIONS
AGREE AND CLOSE
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All
SAVE SETTINGS