Rethinking the Office Sector in Asia Pacific

A FOCUS ON VACANCY

OFFICE VACANCY ACROSS THE REGION’S TOP 25 CITIES HAS BEEN ON AN UPWARD TRAJECTORY SINCE MID-2018, RISING FROM 11.8% TO 16.3% AS AT Q1 2023, EQUIVALENT TO 286 MSF.

It is important to note that there is also considerable variation at the sub-market level, especially in India and mainland China as office stock rapidly expands in peripheral and suburban business districts. The core message here is that while headline vacancy may appear comparatively high and therefore that there are large tranches of vacant space, this does not tell the whole story. Demand for high quality locations remains robust and vacancy rates are much tighter than headline figures show; consequently the risks of obsolescence are lower. However, sub-markets that experience lower levels of demand and have high levels of supply or vacancy are likely to face greater challenges in attracting tenants. Both occupiers and investors should be aware of these sub-market variations as they seek to occupy or develop new office space.

In absolute terms, vacancy is highly concentrated with India’s top eight cities accounting for 43% of the regional total and the four Tier 1 mainland China cities a further 28%, leaving 29% across the remaining 13 markets. Such variance reflects not only the size of each market but also its respective vacancy rate. The outlook is for regional vacancy to tick upwards over the coming years, to reach a little over 18% in 2025, which equates to approximately 390 msf of vacant space.

Demand for high quality locations remains robust and vacancy rates are much tighter than headline figures show; consequently the risks of obsolescence are lower.

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RETHINKING THE OFFICE SECTOR | OPTIMISING YOUR ASSET FOR A NEW ERA | ASIA PACIFIC 12