As expected, oversupply continued to impact the Asia Pacific office market in H1 2024, pushing up regional vacancy to a record high of 19%. About two-thirds of markets saw vacancy rise to new highs or stay at elevated levels. In addition to longer rent-free periods, landlords were seen to be more willing to provide other incentives such as fit-out allowances and turnkey solutions. Paying higher agency fees to attract tenants was increasingly popular in Hong Kong SAR.
Despite delays to some projects due to come on stream in 2025/2026, supply pressure will persist in the short term. High construction and financing costs may ease supply risk in the medium term.
Mid-year review
Asia Pacific will continue to witness a supply boom in 2024, with nearly 70 million sq. ft. NFA of new Grade A office space due to come on stream. Almost two-thirds of markets are forecasted to see an increase in office vacancy, but availability in Seoul will remain exceptionally tight. Landlords in markets with high vacancy will have to improve their product and service offering to attract and retain tenants.
Forecast made in January 2024
Vacancy set to peak amid oversupply pressure
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Cost remains the dominant factor driving renewal and relocation decisions. With fit-out costs remaining high, most occupiers are opting to renew leases due to the lack of CapEx budgets and landlords’ reluctance to lower rents. However, some occupiers have proceeded with relocations provided there are cost saving opportunities and workplace experience upgrades to compensate for significant financial expenditure.
Flight to quality will remain a key theme as occupiers seek quality space in core locations.
Mid-year review
Despite corporate revenue growth among office-using industries projected to be stronger this year, cost control will remain high on the occupier agenda. As tenants carefully manage real estate costs, they will be more inclined to renew leases; focus on assets offering the best value for money; and prioritise workplace optimisation.
Forecast made in January 2024
Cost control to remain top priority
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Stronger than expected leasing activity in Japan and India underpinned a steady y-o-y increase in regional gross leasing volume in H1 2024. Steady expansionary demand in the latter pushed up gross absorption to its second highest first half total since H1 2019.
CBRE’s expectation of full-year growth in gross leasing volume remains unchanged as the strong performance of Japan and India is offset by the sluggish recovery in mainland China, where cost controls and renewals remain prominent trends.
Mid-year review
Leasing demand will be led by the tech sector, particularly in the software and services category. The demand recovery in mainland China is expected to pick up in H2 2024 after more supportive economic measures and easing policies are put in place. CBRE expects Asia Pacific office demand to slightly improve in 2024, with gross leasing volume growing by 0 to 5% y-o-y in 2024.
Forecast made in January 2024
Demand to improve as year progresses
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Thanks to solid upgrading demand and flight to green relocations, prime office rents continued to outperform general Grade A offices in both landlord and tenant favoured markets in H1 2024.
While rents in most markets experienced steady gains in H1 2024, led by Brisbane and Seoul, growth is expected to lose momentum or remain stagnant in H2 2024. Markets where rents are set to decline include those in mainland China, Hong Kong SAR, Bangkok and Manila, all of which are struggling to digest elevated supply.
Mid-year review
Workplace optimisation and sustainability requirements will continue to drive flight to quality demand over the course of this year. High quality premium office space in city centres and ESG-compliant buildings will remain highly sought after by occupiers.
Forecast made in January 2024
Prime office space with ESG features in demand
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