Empty chairs at empty tables: Double-digit vacancies persist in APAC office markets | Real Estate Asia
, APAC
187 views

Empty chairs at empty tables: Double-digit vacancies persist in APAC office markets

Vacancies in the region rose to 14.4% in Q3.

Knight Frank has released its latest Asia-Pacific Prime Office Rental Index for Q3 2023, which showed a moderation in rental decline, falling 1.3% from a year ago, down from the 1.5% drop observed in the previous quarter.

On a quarter-on-quarter basis, the average rents across the region showed stability, with declines in the Chinese Mainland markets moderating. This was further counter-balanced by rental growth in most other developed markets. Overall, the quarterly report indicated that in line with Q2 2023, 15 of the 23 tracked cities reported either stable or increasing rents.

Nonetheless, vacancies continue to rise by 0.4 percentage points on a quarter-to-quarter basis to 14.4%. This ongoing trend has resulted in the metric consistently surpassing 10-year highs since Q3 2022.

Highlights for Q3 2023:

  • 0.0% QoQ change for Asia-Pacific Rental Index in Q3 2023
  • Auckland recorded the highest YoY growth in Q3 2023
  • 15 of 23 Tracked cities recording stable or increasing rents YoY in Q3 2023
  • Offices in Southeast Asia's emerging markets continued to be weighed on by double-digit vacancies. In Singapore, the market remained robust on corporate relocations and a flight-to-quality trend, and rental growth is flattening out
  • Cautious Expectations for 2023 office outlook

Tim Armstrong, global head of occupier strategy and solutions, said, "Despite vacancies rising in the region, rental declines in the third quarter have stabilised, supported by a trend favouring flight-to-quality properties. Overall, the current expansionary cycle in the region affords occupiers a broader range of options and strategies to consider, enhancing their ability to secure favourable lease terms amid current soft conditions. While it is still premature to make a definitive judgement amidst the most recent political developments, the evolving geopolitical landscape is expected to cast a shadow on occupier prospects as companies meticulously evaluate the accompanying risks. As businesses adapt to a future hybrid work model, the trio of location, amenities, and sustainability have gained significance in rebalancing the scales in favour of in-person work.”

Christine Li, head of research, Asia-Pacific, said, “Vacancies rose despite a notably subdued completion pipeline of just over a million square meters in the quarter, marking a steep decline of approximately 75% from Q2 2023, as absorption trails behind the rate of new constructions in the region. Monetary tightening, inflationary pressures and geopolitical events continue to weigh on economic sentiment, as occupiers remained cautious, taking longer to consider space requirements. The backdrop of monetary tightening, inflationary pressures, and ongoing geopolitical events cast a shadow on economic sentiment, resulting in occupiers exercising caution and taking extended time to evaluate their space requirements.”

With the implementation of hybrid work schedules, occupier strategies have decoupled from mere headcount considerations.

Knight Frank’s (Y)OUR SPACE 2023 noted that more than half of the occupiers surveyed believe that their organisations will embrace hybrid workstyles in the next three years.

Ms Li adds, “This will continue to place emphasis on space optimisation strategies. Evolving strategies will likely dampen leasing velocity for the rest of the year, even as macroeconomic volatility hampers occupier ambitions. Consequently, market conditions across most of the region will continue to favour tenants into the initial stages of 2024.”

Asia-Pacific Prime Office Rents for Q3 2023

 

 

Join Real Estate Asia community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

Exclusives

How Metland Indonesia deals with weaker residential purchasing power
The real estate firm continues to expand with residences that are attractive to consumers because of pricing, the ‘growing house’ concept, and sustainable features.