Rethinking the Office Sector in Asia Pacific

PRIVATE OWNERSHIP DOMINATES IN SOME MARKETS

The need to stay relevant could test private landlords’ desire and capacity to allocate sufficient capital expenditure budgets to maintain assets into the future.

IN TURN, OWNERSHIP STRUCTURES THEREFORE BECOME HIGHLY RELEVANT. ALBEIT A GENERALISATION, IT IS ASSUMED THAT INSTITUTIONAL LANDLORDS ARE MORE LIKELY TO POSSESS THE CAPITAL, KNOWLEDGE AND EXPERIENCE TO BOTH MAINTAIN ASSETS AS WELL AS PLAN AND EXECUTE COMPREHENSIVE REFURBISHMENT WORKS WHEN NEEDED.

budgets to maintain assets into the future. The extent to which this becomes a significant issue is currently unquantifiable – the young age of assets in general means that significant refurbishment works will not be required for several years yet. However, it is prudent to flag this as an issue sooner rather than later and astute landlords looking to hold their assets over the longer term should assess their capital and operational-expenditure budgets. The basis of expenditure requirements should stem from an objective assessment of the asset with regard to operational efficiency, sustainability and tenant profile to identify areas that should be prioritised for action and/ or that deliver maximum return on capital. This may be as simple as setting a preventative maintenance program, targeting sustainability or wellness accreditation or diversifying tenancy mix to provide resilience of income.

This is clearly seen in Australia, where institutional ownership of prime grade assets is above 90% (Figure 5) and there are multiple instances of premium grade office towers retaining their premium grade rating even though they were built in the early 1990s. It is a similar situation in Singapore and to a lesser extent Hong Kong -- high institutional ownership and a longstanding demonstration of ongoing asset refurbishment.

Elsewhere in the region, institutional ownership is lower which coincides with their somewhat “emerging” nature. Approximately 14% of office stock in India is owned by REITs, though it is noted that this will rise to around 22% by the end of 2024 with various REITs preparing to launch over the next 18 months. Consequently, the need to stay relevant could test private landlords’ desire and capacity to allocate sufficient capital expenditure

INSTITUTIONAL OWNERSHIP

FIGURE 5: PROPORTION OF INSTITUTIONAL OWNERSHIP OF PRIME ASSETS

Source: Cushman & Wakefield

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RETHINKING THE OFFICE SECTOR | OPTIMISING YOUR ASSET FOR A NEW ERA | ASIA PACIFIC 22