Asia Pacific Office Overview
Asia Pacific’s key office markets tell a story of resilience overall, with steady demand in some markets, surging supply in others – and some cities in India experiencing both surging demand and supply.
As has been the case since the start of the COVID-19 pandemic, the Asia Pacific office market continues to demonstrate its resilience. Fully 153 million square feet (msf) of office space has been absorbed across the region’s top 25 markets since the end of 2019, with 47msf of that occurring in the first nine months of 2022. Indeed, Asia Pacific continues to be the only region to record consecutive quarters of positive net absorption throughout the pandemic.
The broad outlook is for this to continue, though inevitably with nuance at the local level. Full-year office demand in 2022 is expected to reach 65msf, on par with the 63msf absorbed in 2021 and well above the pandemic lows of 2020. A modest improvement is forecast in 2023, with net absorption projected to reach 71msf (+9% y-o-y), before growth stabilises at around 5% per annum through to 2026. While this represents robust demand, it comes at a time of heightened supply as projects that were delayed in the early period of the pandemic regain momentum. Following the 112msf of new supply in 2022, a further 130msf is expected to be delivered in 2023 before slowing to less than 100msf from 2024 onwards. Inevitably, with supply outstripping demand in the near-term, regional vacancy is forecast to soften further, rising from 12.5% pre-pandemic to reach a little over 18% in 2023, after which it is expected to hold steady.
Key Messages:
- Regional office demand is forecast to increase modestly in 2023 to 71msf, up 9% y-o-y. This is primarily driven by ongoing strong demand in India and recovering demand in mainland China.
- As new supply, which was delayed during COVID lockdowns, finally comes to market it is likely to overshoot forecast demand and therefore drive regional vacancy from 16% to 18% in the year ahead.
- Local market trajectories vary significantly, highlighting that in the same way that markets entered the COVID-19 pandemic at different stages of the market cycle, so too will they exit. Occupiers and investors are strongly advised to fully appreciate local market dynamics in their decision making.
- Rental growth across much of the region appears comparatively benign and unlikely to match the high levels of inflation over the near term. Stronger rent growth is expected across many markets towards the end of the forecast horizon as new supply slows and demand improves as economic growth gains momentum.
