While leasing sentiment remained resilient in H1 2026 despite the ongoing Middle East conflict, pockets of low vacancy in mature markets constrained leasing volume. Demand continued to be driven by flight-to-core and a shift to premium offices to support talent attraction and enhance workplace experience, especially in Tokyo, Hong Kong SAR and Sydney.
Surprise: The Middle East conflict initially prompted some Southeast Asian markets to float partial work from home polices to save energy but office attendance is now returning to normal.
Mid-year review
Multinationals implementing stricter office attendance mandates may need to add to their footprint after cutting space at the height of the pandemic. Occupiers' strong desire to be in core locations with high-quality buildings will drive leasing demand in mature markets. Expansionary demand will be seen from tech firms, wealth management and professional services companies.
Forecast made in January 2026
Reassess space requirements
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New Grade A stock in mature markets fell 38% y-o-y in H1 2026, with supply set to tighten further in H2 2026. Australia's pipeline remains thin due to regeneration-led demolition and high construction costs. Supply in Singapore will be muted until 2028, while Tokyo's vacancy is nearing record lows with H2 2026 supply 90% pre-committed. Hong Kong SAR's vacancy also fell as supply halved.
Alert: Most markets’ completion timelines remain on schedule despite this year's elevated supply. Tight availability will not improve in the medium term as construction costs rise due to the Middle East conflict. This will continue to ensure developers stay cautious toward starting new projects.
Mid-year review
Regional office supply is forecasted to peak this year, with mainland China and India set to account for the bulk of new stock. Supply in developed markets is expected to contract further as high construction costs deter new office development. Vacancy in Tokyo, Korea and Singapore will remain low, while availability in Australia and Hong Kong SAR will tighten.
Forecast made in January 2026
Expect limited supply in developed markets
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The widening performance gap between prime and secondary office assets has highlighted the importance of asset enhancement. Many secondary and ageing assets require urgent upgrades as occupier demand increasingly turns toward premium and amenity-rich buildings.
Surprise: Rising construction costs are discouraging landlords of older buildings to undertake asset enhancement. However, some mainland Chinese state-owned enterprises are refurbishing their offices, supported by government policies promoting the regeneration and redevelopment of ageing buildings.
Mid-year review
With occupiers continuing to display a preference for well managed buildings featuring a strong amenity offering, property owners must focus on asset enhancement initiatives through experience-led design and digital enhancements to remain competitive.
Forecast made in January 2026
Pursue asset enhancement amid heightened competition
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The onset of the Middle East conflict along with accelerating AI adoption had only a limited impact on office leasing in H1 2026. The period saw India’s office absorption reach a record high on the back of strong demand from Global Capability Centres (GCCs), while Singapore and mainland China benefit from substantial requirements from AI-related firms upgrading to higher quality and well-located offices.
Surprise: Tokyo and Mumbai are forecasted to record another year of double-digit rental growth, with Brisbane and Sydney also leading regional gains. Hong Kong SAR's rental recovery has outperformed expectations thanks to strong CBD demand from financial occupiers, while the rental decline in Shanghai’s core areas is beginning to stabilise.
Mid-year review
Forecasting office space requirements is becoming increasingly complex as businesses consider the impact of stricter return to office mandates; the adoption of AI in workplaces; and more fluid business planning as global geopolitical tensions persist. These dynamics will continue to reshape workplace strategies, requiring occupiers to implement greater flexibility and scenario-based planning to align with rapidly changing market conditions.
Forecast made in January 2026
Carefully conduct space planning
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