The recovery of regional leasing activity has fallen below expectations due to weaker demand in mainland China. Other headwinds included banking sector turmoil in the U.S., which prompted many multinationals to adopt a more cautious attitude towards leasing office space worldwide. CBRE’s forecast for full-year gross leasing volume has been revised down to a mild contraction.
Although new lease commitments by tech firms have been limited given ongoing CapEx concerns and headcount reduction, consolidation is slowing in mainland China.
Mid-year review
The Asia Pacific labour market will remain tight, with redundancies by tech firms accounting for only a small fraction of their total workforce. Corporate revenue will continue to grow but at slower pace in the face of heightened economic uncertainty. CBRE expects office demand to be solid, with leasing volume growing by 0-5% in 2023, driven by the recovery in mainland China.
Forecast made in January 2023
Healthy leasing demand
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The pace of the return to the office remains in line with CBRE’s initial forecasts. Average office utilisation in Asia Pacific stood at about 65% in March, with attendance in Greater China now back at pre-pandemic levels.
With many firms tightening remote working policies, the return to the office will continue to accelerate in lagging markets such as Australia and India.
Mid-year review
Office attendance has now stabilised at a level around 10% - 15% lower than prior to the pandemic. India and Australia will experience a relatively stronger impact from hybrid working compared to other markets.
Forecast made in January 2023
Office attendance to find new equilibrium
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Flight to new-build and flight to green will remain prominent trends. With regional vacancy rising to a 20-year high of 18.0% in H1 2023 and set to remain elevated for the remainder of the year, occupiers will have ample upgrading options.
Mid-year review
New office supply is set to rebound in Asia Pacific this year, with completions equivalent to about 20% of current Grade A supply due to come on stream over the next three years. This will create opportunities for occupiers to expand in previously tight markets, such as Singapore and Taipei.
Forecast made in January 2023
Focus on New and ESG-compliant Buildings
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Rents in Seoul and Australia (except Melbourne) outperformed in H1 2023 but growth will lose momentum in H2 2023. Other markets will remain weak, with rents in mainland China expected to decline further. In Singapore, rents may come under pressure in H2 2023 due to the addition of one very large new project along with elevated levels of shadow space.
As expected, occupiers remain cost cautious and are displaying very weak expansionary appetite. Pre-leasing is set to remain slow and the market will continue to favour tenants.
Mid-year review
With the exception of major Australian cities and Seoul, rental growth will be sluggish in most Asia Pacific markets. Although the region has entered an early stage of rental recovery, the rebound will be slow and L-shaped. Rents in two-thirds of markets will remain below pre-pandemic levels at the end of 2023.
Forecast made in January 2023
Tenant-favoured market
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