Asia Pacific Office Outlook 2024

ASIA PACIFIC O F F I C E

2 0 2 4

3

CLIENT NAME | CUSHMAN & WAKEFIELD

CONTENTS

A S I A PAC I F I C O F F I C E O U T LOO K 2 0 2 4

J A P A N  Tokyo

A U S T R A L I A  Brisbane  Melbourne  Sydney

M A L A Y S I A  Kuala Lumpur

G R E A T E R C H I N A  Beijing

 Hong Kong  Shenzhen  Shanghai  Guangzhou

P H I L I P P I N E S  Manila

 Singapore S I N G A P O R E

I N D I A

 Delhi NCR  Mumbai  Kolkata  Hyderabad  Chennai  Bengaluru  Ahmedabad

S O U T H K O R E A

 Seoul

T H A I L A N D  Bangkok

 Pune

I N D O N E S I A  Jakarta

V I E T N A M  Hanoi  Ho Chi Minh City

ASIA PACIFIC O F F I C E

AU S T R A L I A 2 0 2 4

BRISBANE

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 No new supply is forecast to enter the Brisbane CBD market in 2024. This marks the second consecutive year of flat supply, after just 45,000 sqm finished in 2022.  After 2024, only one project is expected to complete in 2025 (45,000 sqm, 85% pre-committed) and one in 2026 (45,000 sqm, 65% pre-committed).  Further afield, the potential for projects to go ahead as scheduled remains uncertain.

 The Brisbane CBD experienced three years of negative prime net absorption from 2019 through 2021, before rebounding to 63,000 sqm in 2022.  The strength spilled over into 2023 with net absorption of 14,000 sqm, and is expected to average 50,000 sqm in 2024 and 2025.  Robust demand and limited supply will continue to push vacancy lower to settle at 10% in 2027.

 Prime gross effective rents increased more than 10% over 2023, driven primarily by a rapid increase in face rents.  Rental growth is expected to slow to 4% in 2024 as the lack of new supply will limit the quality uplift of face rents.  However, the underlying fundamentals of the Brisbane office market remains robust, and gross effective rent growth is expected to average above 5% between 2025 and 2027.

 The redevelopment of the Eagle Street area, together with the ongoing flight to quality, will reinforce the “Golden Triangle” as the destination precinct within Brisbane’s CBD, bringing together high quality office buildings with amenity and transport infrastructure.

BRISBANE

NEW SUPPLY

N EW S U P P LY ( S QM )

90,000

FORECAST

 The only major project to recently complete was in 2022 (Heritage Lanes at 80 Ann Street) providing 60,000 sqm of premium grade space.  The 45,000 sqm development at 205 North Quay has been fully pre committed and is currently under construction with delivery expected towards the end of 2024.  45,000 sqm at 360 Queen Street is now expected to be delivered in Q2 2025.  Construction has begun on Dexus’s Waterfront Brisbane, with completion expected 2028.

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

2021

2022

2023F

2024F

2025F

2026F

2027F

Source: Cushman & Wakefield

BRISBANE

DEMAND & VACANCY

N E T A B S O R P T I O N ( S QM ) A N D VAC A N C Y R AT E ( % )

FORECAST

70,000

18.0%

60,000

16.0%

 Following three consecutive years of contracting office demand, net absorption spiked to 63,000 sqm in 2022.  Demand remained positive in 2023, with net absorption expected to reach 14,000 sqm.  Robust interstate migration has led to an upward revision in short-term employment forecasts for the Brisbane CBD.  As a result, net absorption is

50,000

14.0%

40,000

12.0%

30,000

10.0%

20,000

8.0%

10,000

6.0%

0

4.0%

-10,000

2.0%

-20,000

0.0%

2021

2022

2023F 2024F 2025F 2026F 2027F Net Absorption Vacancy Rate

expected to reach 42,000 sqm in 2024 and 55,000 sqm in 2025.

Source: Cushman & Wakefield

BRISBANE

RENT GROWTH

R E N T ( AU D / S QM / Y R ) A N D R E N T G R OWT H ( % P E R A N N U M )

 Growth in prime gross effective rents rose 11% in 2023, supported by limited new supply, a robust labour market, and inflationary pressures pushing up face rents.  With no new supply entering the market and declining vacancy, momentum should continue into 2024 with prime gross effective rents forecast to increase by 4% to reach AUD 540 sqm/yr.  With little new supply forecast to hit the market and a persistently strong labour market, prime gross effective rental growth is expected to average in excess of 5% between 2025 to 2027.

FORECAST

12.0%

700

10.0%

600

8.0%

500

6.0%

4.0%

400

2.0%

300

0.0%

-2.0%

200

-4.0%

100

-6.0%

0

-8.0%

2021

2022

2023F

2024F

2025F

2026F

2027F

AUD/SQM/YR

Rent growth (%)

Source: Cushman & Wakefield

MELBOURNE

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 After nearly 100,000 sqm of prime office stock hit the market in 2022, new supply in 2023 fell to 80,000 sqm.  Supply is expected to continue to be

 Although net absorption slowed from 2022, it ended 2023 in positive territory.  A resilient labour market has seen employment growth forecasts revised higher in recent quarters.  This is expected to support demand in the short term, as prime net absorption is expected to rebound back above 100,000 sqm by 2025.  Against this backdrop,

 Prime Melbourne CBD office rents maintained a healthy rate of growth in 2023 as vacancy stabilised and inflation put upwards pressure on face rents.  Supported by a strong labour market, incentives are forecast to trend lower over the next several years.  This will support near-term rental growth; net effective rents are expected to increase over 6% annually between 2024 to 2027.

 The post-pandemic recovery has supported a cyclical upswing in tenant demand for Melbourne's CBD office market. Growth is expected to continue, and more limited supply in the near-term should support ongoing rental growth.

comparatively subdued over the next two years, with only 50,000 sqm of stock scheduled to complete in 2024 and 80,000 sqm in 2025.

 The pipeline of new projects is busier

after 2025, with 125,000 sqm expected to complete in 2026 and 140,000 sqm in 2027.

vacancy is expected to continue to trend lower, stabilising around 11% by 2026.

MELBOURNE

NEW SUPPLY

N EW S U P P LY ( S QM )

 After a surge in prime office supply (310,000 sqm in 2020 and 125,000 sqm in 2021), 2022 and 2023 were comparatively quiet years, with only 98,000 sqm and 81,000 sqm of new stock hitting the market, respectively.  As some projects have been delayed to allow the market to digest existing stock, 2024 and 2025 are expected to be relatively limited in terms of new supply, with only 130,000 sqm scheduled to complete over two years.  Thereafter completions are expected to pick up, as prime office completions are planned to average over 130,000 sqm in each of 2026 and 2027.

160,000

FORECAST

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

2021

2022

2023F

2024F

2025F

2026F

2027F

Source: Cushman & Wakefield

MELBOURNE

DEMAND & VACANCY

N E T A B S O R P T I O N ( S QM ) A N D VAC A N C Y R AT E ( % )

FORECAST

-60,000 -40,000 -20,000 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000

16.0%

14.0%

 A surprisingly resilient labour market has seen several upward revisions to Melbourne CBD office employment forecasts since the COVID-19 pandemic.  Against this backdrop, prime net absorption is expected to hit between 80,000 sqm and 100,000 sqm in each of 2024 and 2025.  Although new supply scheduled to complete from 2026 will likely put a floor under vacancy, robust demand is expected to put downward pressure on vacancy rates in the near term.

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

2021

2022

2023F 2024F 2025F 2026F 2027F Net Absorption Vacancy Rate

Source: Cushman & Wakefield

MELBOURNE

RENT GROWTH

R E N T ( AU D / S QM / Y R ) A N D R E N T G R OWT H ( % P E R A N N U M )

 Net effective prime rents in the Melbourne CBD maintained momentum in 2023, increasing 6%.  Growth was largely driven by rising face rents, as prime incentives were up by circa 50 basis points as the market continued to digest

FORECAST

600

10.0%

8.0%

500

6.0%

400

4.0%

2.0%

the surge in supply from 2020 and 2021.  A dearth in new supply should see incentives stabilise in 2024 before starting to trend lower thereafter.

300

0.0%

200

-2.0%

-4.0%

100

 Meanwhile, a robust labour market should support rental growth; net effective rent growth is expected to average 6.3% annually from 2024 to 2027.

-6.0%

0

-8.0%

2021

2022

2023F

2024F

2025F

2026F

2027F

AUD/SQM/YR

Rent growth (%)

Source: Cushman & Wakefield

SYDNEY

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 Following the completion of more than 140,000 sqm of new and refurbished prime office stock in 2022, only 10,000 sqm supply hit the market in 2023.  The lull in supply is likely to be temporary, however, as 270,000 sqm of supply is scheduled to complete in 2024.  Beyond 2024, only 90,000

 Prime office net absorption has been resilient despite the shocks of COVID-19 and subsequent rise in flexible working.  Prime net absorption rose for the third consecutive year in 2023, driven primarily by demand for centrally located premium and recently-renovated A grade property. supply is expected to hit the market in 2024, a substantial share of this supply is pre-committed, which should limit upward pressure on vacancy.  Although a surge in

 Sydney prime gross effective rent growth registered a second consecutive year of robust growth in 2023, increasing more than 7.5%.  Although the market remains nuanced, quality uplift is expected to push face rents higher in 2024 while a resilient labour market is expected to keep incentives stable.  Prime gross effective rental growth is expected to average around 4% annually in the 2024 to 2027 period.

 A surprisingly resilient labour market has

supported the ongoing recovery in the Sydney CBD office market, and it is well-placed to absorb a surge in supply in 2024. Limited supply post-2024 should result in a gradual decline in incentives and a pick-up in effective rent growth.

sqm of net supply is expected to complete between 2025 and 2027.

SYDNEY

NEW SUPPLY

N EW S U P P LY ( S QM )

300,000

FORECAST

 New supply of prime office space was limited to a handful of refurbishments in 2023. This is expected to change markedly in 2024 as the stock of prime office space is forecast to increase by net 270,000 sqm.  1 Elizabeth Street (NLA 72,500 sqm, 100% pre committed) and Parkline Place (48,000 sqm, 60% pre committed) are the two main developments scheduled to complete.  Moving forward, supply is expected to be limited in 2025 and 2026 allowing the market some time to digest this new office stock.

250,000

200,000

150,000

100,000

50,000

0

2021

2022

2023F

2024F

2025F

2026F

2027F

(50,000)

Source: Cushman & Wakefield

SYDNEY

DEMAND & VACANCY

N E T A B S O R P T I O N ( S QM ) A N D VAC A N C Y R AT E ( % )

FORECAST

14.0%

250,000

12.0%

 Employment growth proved to be surprisingly resilient to several macroeconomic headwinds in 2023, supporting continued growth in net absorption.  Moving forward, the Sydney CBD is expected to benefit from a surge in overseas migration, though demand for office space may be constrained by the rise in flexible working.  High levels of supply in 2024 combined with a slightly weaker outlook for employment in the medium term should hold vacancy above 10% through 2025.

200,000

10.0%

150,000

8.0%

6.0%

100,000

4.0%

50,000

2.0%

0.0%

0

2021

2022

2023F 2024F 2025F 2026F 2027F Net Absorption Vacancy Rate

Source: Cushman & Wakefield

SYDNEY

RENT GROWTH

R E N T ( AU D / S QM / Y R ) A N D R E N T G R OWT H ( % P E R A N N U M )

FORECAST

10.0%

1,400

8.0%

1,200

 Prime rental growth in the Sydney CBD continued to gain momentum in 2023, as gross effective rents increased 7.5% over the year.  The increase is driven by face rent growth and recent refurbishments, which have lifted the average prime rent.  Rent incentives, after rising sharply through the pandemic, have stabilised at around 35%.  Incentives are likely to begin to trend lower beyond 2024, ultimately settling around 32% by 2027.

6.0%

1,000

4.0%

800

2.0%

600

0.0%

400

-2.0%

200

-4.0%

-6.0%

0

2021

2022

2023F

2024F

2025F

2026F

2027F

AUD/SQM/YR

Rent growth (%)

Source: Cushman & Wakefield

RESEARCH Sean Ellison

TENANT REPRESENTATION Michael Kearins Head of Tenant Representation, Australia michael.kearins@cushwake.com

Head of Forecasting, Australia Sean.ellison@cushwake.com

LEASING Tim Molchanoff Head of Leasing, Australia tim.molchanoff@cushwake.com ASIA PACIFIC Dr Dominic Brown Head International Research, Asia Pacific dominic.brown@cushwake.com

CAPITAL MARKETS Josh Cullen Head of Capital Markets, Australia josh.cullen@cushwake.com

CONTACTS

Disclaimer. The information in this material is general in nature and has been created by Cushman & Wakefield for information purposes only. It is not intended to be a complete description of the markets or developments to which it refers. The material uses information obtained from a variety of sources which Cushman & Wakefield believe to be reliable however, it has not verified all or any information and does not represent, warrant or guarantee its accuracy, adequacy or completeness. Any forecasts or other forward-looking statements contained in this material may involve significant elements of subjective judgment and assumptions as to future events which may or may not be correct and are beyond the control of Cushman & Wakefield. Cushman & Wakefield is not responsible for any loss suffered as a result of or in relation to the use of this material. To the extent permitted by law, Cushman & Wakefield excludes any liability, including any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this material. All expressions of opinion included in this material are subject to change. © 2023 Cushman & Wakefield. All rights reserved.

ASIA PACIFIC O F F I C E

G R E AT E R C H I N A 2 0 2 4

BEIJING

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 Buffeted by economic uncertainty, net absorption continued to weaken in 2023. In the first three quarters of 2023, the overall market net absorption reached 170,771 sqm. Net absorption is forecast to be less than 300,000 sqm in 2023.  The market will remain tenant favorable for the next few years, and the domestic tenants will continue to lead the leasing market.  In the future, high-end manufacturing, green energy, the digital economy, and technology and finance will become the main sources for office demand in Beijing.

 From 2023 to 2026, the Beijing office market is expected to usher in about 1.37 million sqm of office space. Among this total, the future supply in the five core submarkets and suburban submarkets will future supply, respectively.  With the relaxation of the COVID-19 control measures, projects that were originally scheduled to open in 2022 and launch in 2023 are now scheduled to launch in 2024. New supply volume will gradually decrease in 2025 and 2026. account for 24.9% and 75.1% of the city’s total

 Rents have been under pressure in 2023. By Q3 2023, the overall market rental reached RMB 308 per sqm, down 7.0% y-o-y.  Many projects are expected to enter the market in 2023 and 2024. The new space and high vacancy will continue to exert pressure on landlords. Subsequently, market rent will still face some downward pressure.  With the steady recovery of the economy and the fall in office supply in 2025 and

 In September 2022, eight major departments in Beijing jointly issued ‘An Action Plan on the Reform and Open Development of Construction Green Finance’, which specifically highlighted the need to strengthen financial support for green buildings. With the realization of the net zero goal promoted by the government, and tenants’ growing awareness of green real estate, buildings with green certifications will be more favored by the market.

2026, positive rental growth may return.

BEIJING

NEW SUPPLY

N EW S U P P LY ( S QM )

700,000

FORECAST

600,000

500,000

400,000

 Ahead, 1.4 million sqm of new supply is now expected to enter the market by the end of 2026, of which 24.9% will be in the five core submarkets.  Future office market supply will be concentrated in the

300,000

200,000

100,000

Tongzhou and Wangjing Jiuxianqiao submarket, accounting for 33.7% and 32.8% of the total future supply, respectively.

0

2021

2022

2023F

2024F

2025F

2026F

2027F

Source: Cushman & Wakefield

BEIJING

DEMAND & VACANCY

N E T A B S O R P T I O N ( S QM ) A N D VAC A N C Y R AT E ( % )

 We expect that pre-leasing from new entrants and large area transactions will boost net absorption to 250,000 sqm citywide by the end of 2023.  The TMT, finance, and professional services industries will remain the top three sectors in terms of leasing demand in the future.  The government work report presented at the 2023 “Two Sessions” meeting highlighted that the country will vigorously develop the digital economy and support the development of the platform economy. This will promote sustainable and stable development of the high-tech industry, and in turn drive long-term office leasing demand from this sector.

FORECAST

18.0%

900,000

16.0%

800,000

14.0%

700,000

12.0%

600,000

10.0%

500,000

8.0%

400,000

6.0%

300,000

4.0%

200,000

2.0%

100,000

0.0%

0

2021

2022

2023F 2024F 2025F 2026F 2027F Net Absorption Vacancy Rate

Source: Cushman & Wakefield

BEIJING

RENT GROWTH

R E N T ( R M B / S QM / MO ) A N D R E N T G R OWT H ( % P E R A N N U M )

FORECAST

350

1.0%

0.0%

340

-1.0%

330

 In the short-term, the office leasing market will continue to be tenant-favorable, with the vacancy rate exerting pressure on landlords and the average rental level expected to further decline.  Beijing's economy has already demonstrated a the coming two years, the limited new supply volume, further improvement in the economy, and further leasing strategy adjustments from landlords will help stabilize the rental level. recovery and improvement in 1H 2023. We expect that in

-2.0%

320

-3.0%

310

-4.0%

300

-5.0%

290

-6.0%

280

-7.0%

270

-8.0%

260

-9.0%

2021

2022

2023F 2024F 2025F 2026F 2027F

Rent (RMB/SQM/MO)

Rent growth (%)

Source: Cushman & Wakefield

GUANGZHOU

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 The entry of new office buildings in emerging business districts will lead to further competition in the market. The city's average rents are expected to continue to fall. It is expected that by 2024, the city's average rents will fall to less than RMB150 per sqm per month.  As the supply recedes and the office atmosphere in emerging business districts matures, landlords may readjust their rental expectations. The rate of decline in citywide average rents is expected to narrow gradually. The citywide average rents are expected to stabilize in 2027.

 The Guangzhou office market is expected to see 3.0 million sqm of new office space in the 2023 to 2027 period.  The citywide stock is  A peak in supply is expected in 2025, with over 790,000 sqm of new office space scheduled to enter the market. After 2025, the average annual new supply is expected to decline to less than 50,000 sqm. expected to reach 9.6 million sqm in 2027.

 The continued entry of new supply into the market will influence the city's vacancy rate to remain high.  The overall net absorption is expected to reach a peak in 2025 as a large amount of new supply will have a stimulating effect on demand.  The increase in the city's vacancy rate is expected to stabilize from 2024

 Since the beginning of 2023, the Guangzhou government has issued several policies to support the recovery and development of the real economy. The continuous improvement in future expectations will be favorable to business operations and will drive the release of demand in the office market.

onwards as the macroeconomic environment gradually recovers.

GUANGZHOU

NEW SUPPLY

N EW S U P P LY ( S QM )

900,000

FORECAST

800,000

700,000

 561,211 sqm of new supply is expected to enter the Guangzhou office market in 2023.  The city’s total new supply is expected to reach 2.4 million sqm in the next four years. The city is expected to see a new supply peak in 2025, when the annual supply is expected to reach nearly 800,000 sqm. The future office supply will mainly be concentrated in the Financial Town and Pazhou district. The continued entry of large amounts of new supply will intensify market competition.

600,000

500,000

400,000

300,000

200,000

100,000

0

2021

2022

2023F

2024F

2025F

2026F

2027F

Source: Cushman & Wakefield

GUANGZHOU

DEMAND & VACANCY

N E T A B S O R P T I O N ( S QM ) A N D VAC A N C Y R AT E ( % )

FORECAST

-50,000 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000

35.0%

30.0%

 Visits to Guangzhou's Grade A offices have picked up since the beginning of 2023.  Comparing with 2022, the city's net absorption in 2023 will improve, raising to 54,110 sqm. Going forward, leasing demand is expected to recover against the backdrop of an optimized business environment and the gradual transformation and upgrading of industrial structures.  The large amount of new supply coming to the market will stimulate demand while driving the city's vacancy rate to remain high.

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

2021

2022

2023F 2024F 2025F 2026F 2027F Net Absorption Vacancy Rate

Source: Cushman & Wakefield

GUANGZHOU

RENT GROWTH

R E N T ( R M B / S QM / MO ) A N D R E N T G R OWT H ( % P E R A N N U M )

FORECAST

100 120 140 160 180 200

-8.0% -7.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0%

 New supply in emerging areas will bring competition to the market. With the increase in leasable space, the bargaining power of tenants will be enhanced. In the short term, rents will remain on a downward trend.  However, as both the economic environment and market demand stabilise, the rate of rental decline will continue to narrow. Combined with the expected end of the office supply peak, rent growth for office space in Guangzhou is forecast to return to positive in 2027.

0 20 40 60 80

2021

2022

2023F 2024F 2025F 2026F 2027F

Rent (RMB/SQM/MO)

Rent growth (%)

Source: Cushman & Wakefield

HONG KONG

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 Hong Kong’s office market continued to face headwinds, with net absorption expected to record -143K sf in 2023, but to rebound up to 600K sf in 2024 due to the pre commitment from supply.  As a result of new supply, availability is expected to increase to 19.1% by the end of 2023 and to further increase to 19.6% in 2024.  The overall availability will stay in the double-digit territory in the foreseeable future, as demand will unlikely catch up with supply as the market remains affected by geopolitical and economic uncertainties.

 Hong Kong office space leasing recovery remained slow due to global economic uncertainties and persistent inflationary pressures.  Occupiers adopted a cautious approach towards decision-making. Rents are forecast to decline by 7% in 2023, and then drop slightly further by 8% in 2024, before declining at a slower pace of 4% in 2025.  This movement will take rents to HKD 48 per sf/mth at the end of 2023, and to drop further to HKD 45 per sf/mth by the end of 2024, before bottoming out in 2025 at HKD 43 per sf/mth.

 After 1.8 msf* of new supply in 2023, five new projects are expected to enter the market in 2024, totaling 1.2 msf. Of the new projects, two will be in Kowloon East, with on each in Greater Central, Wanchai / Causeway Bay and Kowloon West, respectively.  Beyond 2024, the supply is expected to peak at 4.0 msf in 2025 and then drop back to 750K msf in 2026.

 Looking ahead, given the uncertain global economic outlook, occupiers are expected to maintain a conservative approach towards managing their real estate costs, in turn further weighing on office rents amid high vacancy levels.  We expect that mainland enterprises will continue to play a pivotal role in supporting demand in core submarkets and for quality properties in prestigious locations with good accessibility.

HONG KONG

NEW SUPPLY

N EW S U P P LY ( M S F )

4.5

FORECAST

4.0

3.5

3.0

 Five new projects are expected to enter in 2024, totaling 1.2 msf.  Of the new projects, two will be in Kowloon East, and one

2.5

2.0

each in Greater Central, Wanchai / Causeway Bay and Kowloon West, respectively.

1.5

1.0

 Beyond 2024, the supply is expected to peak at 4.0 msf in 2025 and then drop back in 2026 at 0.8 msf.  The 5-year average supply from 2023-2027 is expected to reach 1.6 msf per annum.

0.5

0.0

2021

2022

2023F

2024F

2025F

2026F

2027F

Source: Cushman & Wakefield

HONG KONG

DEMAND & VACANCY

N E T A B S O R P T I O N ( M S F ) A N D VAC A N C Y R AT E ( % )

 Towards 2H 2023, there were more new lettings arising from diverse sectors besides banking & finance and professional services, such as

FORECAST

25.0%

1.0

the public sector and consumer products.

0.8

 Particularly, the Kowloon East submarket, which is

20.0%

0.6

popular among cost conscious occupiers,

0.4

remained attractive to non banking finance occupiers, with several sizable deals recorded.  Net absorption is forecast to stay negative at -143K sf in 2023 before recovering to 600D sf in 2024, supported by ongoing economic recovery and preleased space from new supply.  However, availability is expected to edge up and stay at double-digit levels through to at least 2027 due to the elevated supply pipeline in the coming years.

15.0%

0.2

0.0

10.0%

-0.2

-0.4

5.0%

-0.6

0.0%

-0.8

2021

2022

2023F

2024F

2025F

2026F

2027F

Net Absorption Availability Rate*

Source: Cushman & Wakefield

HONG KONG

RENT GROWTH

R E N T ( H K D / S F/ M O ) A N D R E N T G R OWT H ( % P E R A N N U M )

FORECAST

60.0

4.0%

2.0%

50.0

 The full-year rental change is expected to record a drop of 7% in 2023, followed by a yearly decline of 8% in 2024.  Rental recovery is to remain slow, due to the moderate new demand anticipated as a result of a cautious business outlook, persistent high interest rates, and geopolitical uncertainties.  On a brighter note, the flight to quality will continue to drive market activities, while leasing demand from mainland occupiers will likely expand further.  Office rents are forecast to bottom out in 2025; rental recovery to take place from 2026 onwards.

0.0%

40.0

-2.0%

30.0

-4.0%

20.0

-6.0%

10.0

-8.0%

0.0

-10.0%

2021

2022

2023F 2024F 2025F 2026F 2027F

Rent (HKD/SQFT/MO)

Rent growth (%)

Source: Cushman & Wakefield

SHANGHAI

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 From 2024 to 2027, more new supply is expected to enter Shanghai’s Grade A office market. During this period, over 3.8 million sqm of office space will be added to the market.  2024 will be another peak

 Considering the slow

 Over 60% of new supply will be located in suburban areas in the future, which will drive growth in these non-core areas and attract more quality tenants and corporates to gather.  The rental gap between suburban and core areas is narrowing, and this trend is expected to continue in the future.

 In 2023, rents have been under pressure and have declined by about 1.5%. The annual rental growth is likely to register -1% during the next two years, weighed by a higher-than average vacancy rate. The monthly rental for Shanghai’s Grade A office

economic recovery and ongoing uncertainty internationally, the office leasing market will remain sluggish. As a result, net absorption is expected to be around 550,000 sqm in 2024.  Due to the high volume of new supply to be added in the future, a vacancy rate peak of around 22.7% is expected in 2024.  The market will remain tenant favorable and there will be more choices for tenants.

supply year as a result of projects delayed in the past.

will drop to around RMB240 per sqm.

 Of those projects to complete in 2024,

approximately twice as many projects will be completed in the city’s suburban areas as in the core areas.

SHANGHAI

NEW SUPPLY

N EW S U P P LY ( S QM )

1,800,000

FORECAST

1,600,000

1,400,000

 From 2024 to 2027, more new supply is expected to enter Shanghai’s Grade A office market, adding over 3.8 million sqm of office space.  2024 will be another peak supply year as a result of projects delayed in the past.  More quality projects will complete in the next 3 to 4 years, and this will bring new vitality and opportunities to the Shanghai Grade A office market in both suburban and core areas.

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

2021

2022

2023F

2024F

2025F

2026F

2027F

Source: Cushman & Wakefield

SHANGHAI

DEMAND & VACANCY

N E T A B S O R P T I O N ( S QM ) A N D VAC A N C Y R AT E ( % )

FORECAST

1,600,000

25.0%

1,400,000

20.0%

 Considering the slow economic recovery and ongoing uncertainty

1,200,000

1,000,000

internationally, the office leasing market will remain sluggish. As a result, net absorption is expected to be around 550,000 sqm in 2024.  Due to the high volume of new supply to be added in the future, a vacancy rate

15.0%

800,000

10.0%

600,000

400,000

5.0%

200,000

peak of around 22.7% is expected in 2024.  The net absorption is

0.0%

0

2021

2022

2023F 2024F 2025F 2026F 2027F Net Absorption Vacancy Rate

expected to stabilize when the economy stabilizes in the mid- to longer term.

Source: Cushman & Wakefield

SHANGHAI

RENT GROWTH

R E N T ( R M B / S QM / MO ) A N D R E N T G R OWT H ( % P E R A N N U M )

FORECAST

1.5%

250

248

1.0%

246

 In 2023, rents have been under pressure and have declined by about 1.5%.  The annual rental growth is likely to register -1% over the next two years, weighed by a higher-than-average vacancy rate. The monthly rental for Shanghai’s Grade A office will drop to around RMB240 per sqm.  With the existing and future high supply volume and absorption challenges, rental growth will likely see a steady slowdown in both suburban and core markets.

0.5%

244

0.0%

242

-0.5%

240

-1.0%

238

-1.5%

236

234

-2.0%

2021

2022

2023F 2024F 2025F 2026F 2027F

Rent (RMB/SQM/MO)

Rent growth (%)

Source: Cushman & Wakefield

SHENZHEN

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 The pre-leasing activities of the new projects contributed largely to the net absorption of 2023, a big jump from 2022.  While completions continue to enter the market, soft demand is likely to remain in 2024. The vacancy rate will continue to trend upward and the tenant favorable market pattern will persist. headquarter buildings will contribute to net absorption supported by owner - occupation. The demand is anticipated to gradually recover in 2025 as economic conditions recover.  The completion of

 Approximately 1.09 million sqm of new office supply is slated to enter Shenzhen's Grade A office market in 2023.  The market will see peaks with around 1.3 million sqm of new supply completing in both 2025 and 2026. The supply influx is set to maintain market pressure.  Some landlords are believed to have adjusted their leasing strategies and postponed project launch timelines in response to the uncertain economic environment.

 Amid sluggish demand and high supply pressure, landlords generally trimmed rents further in 2023, resulting in a deep fall in citywide average rents.  The downward trend in rents is expected to continue but with a softer decline starting from 2024.  As Grade A office rental costs continue to slide, it is expected that the flight to

 The international and

domestic environments remain uncertain, causing the office demand side to remain generally cautious.  The oversupply of Grade A office space in Shenzhen is expected to continue in the next few years. The reinvigoration of leasing demand largely depends on improvements in the economic outlook.

quality by tenants will become more common.

SHENZHEN

NEW SUPPLY

N EW S U P P LY ( S QM )

 Approximately 1.09 million sqm of new Grade A office supply is slated to launch in 2023. Of this supply, Qianhai, Futian and Nanshan will take nearly 30%, respectively. The remaining 13.8% belongs to Bao’an submarket.  The market will then see a slight relief in supply with 780,000 sqm completing in 2024, followed by supply completion peaks of around 1.3 million sqm in both 2025 and 2026. The supply influx is set to maintain market pressure.  Amid intensifying market competition, some landlords are believed to have adjusted leasing strategies and

1,600,000

FORECAST

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

postponed project launch times in response to the uncertain economic environment.

0

2021

2022

2023F

2024F

2025F

2026F

2027F

Source: Cushman & Wakefield

SHENZHEN

 The supply influx is forecast to buoy cumulative net absorption to surpass the 400,000 sqm mark in 2023, a big jump from 2022, largely supported by the pre-leasing activities of new projects. However, the new supply impact will push the estimated year-end citywide vacancy rate to about 27.3%, up 4.5 percentage points y o-y.  Soft demand is likely to remain in 2024. While completions will continue to enter the market, the vacancy rate for the overall market will face an upward trend. Therefore a tenant-favorable market pattern will persist.  The market is expected to gradually recover in 2025 and 2026, helped in part by the owner-occupation headquarter completions which will contribute to net absorption.

DEMAND & VACANCY

N E T A B S O R P T I O N ( S QM ) A N D VAC A N C Y R AT E ( % )

FORECAST

40.0%

800,000

35.0%

700,000

30.0%

600,000

25.0%

500,000

20.0%

400,000

15.0%

300,000

10.0%

200,000

5.0%

100,000

0.0%

0

2021

2022

2023F 2024F 2025F 2026F 2027F Net Absorption Vacancy Rate

Source: Cushman & Wakefield

SHENZHEN

RENT GROWTH

R E N T ( R M B / S QM / MO ) A N D R E N T G R OWT H ( % P E R A N N U M )

FORECAST

250

-9.0% -8.0% -7.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0%

200

 Amid the sluggish demand influenced by the fluctuating economic environment and high supply pressure, landlords generally trimmed rents further in 2023 to attract and retain tenants, resulting in a deep fall in citywide average rents.  The downward trend in rents is expected to continue but with a softer decline starting from 2024. A return to positive rental growth may be possible in 2027.  As Grade A office rental costs continue to slide, it is expected tenants’ office space upgrades with lower costs will become more common.

150

100

50

0

2021

2022

2023F 2024F 2025F 2026F 2027F

Rent (RMB/SQM/MO)

Rent growth (%)

Source: Cushman & Wakefield

RESEARCH Shaun Brodie Head of Research Content, Greater China shaun.fv.brodie@cushwake.com Rosanna Tang Head of Research, Hong Kong rosanna.tang@cushwake.com ASIA PACIFIC Dr Dominic Brown Head of International Research, Asia Pacific dominic.brown@cushwake.com

CAPITAL MARKETS Francis Li Head of Capital Markets, Greater China francis.cw.li@cushwake.com TENANT REPRESENTATION Jonathan Wei President, Project & Occupier Services, China jonathan.cy.wei@cushwake.com

John Siu Managing Director, Hong Kong john.siu@cushwake.com

CONTACTS

Disclaimer. The information in this material is general in nature and has been created by Cushman & Wakefield for information purposes only. It is not intended to be a complete description of the markets or developments to which it refers. The material uses information obtained from a variety of sources which Cushman & Wakefield believe to be reliable however, it has not verified all or any information and does not represent, warrant or guarantee its accuracy, adequacy or completeness. Any forecasts or other forward-looking statements contained in this material may involve significant elements of subjective judgment and assumptions as to future events which may or may not be correct and are beyond the control of Cushman & Wakefield. Cushman & Wakefield is not responsible for any loss suffered as a result of or in relation to the use of this material. To the extent permitted by law, Cushman & Wakefield excludes any liability, including any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this material. All expressions of opinion included in this material are subject to change. © 2023 Cushman & Wakefield. All rights reserved.

ASIA PACIFIC O F F I C E

I N D I A 2 0 2 4

AHMEDABAD

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 2 msf of new supply is expected to enter the Ahmedabad market in 2024 across submarkets.  Further, 2.07 msf is expected in 2025, followed by an average supply of 1.15 msf anticipated during 2026-2027.

 Net absorption in 2023 is expected to reach 1.35 msf. Demand momentum is expected to continue in 2024 and 2025 with an average of 1.35 msf of net absorption each year.  Vacancy is expected to stay in the range of 30-31% from 2023 through 2025.  Strong supply addition in 2024 and 2025 is expected to cause a temporary increase in vacancy by 0.5– 1%.

 Rents are forecast to grow by around 3% between 2023 and 2025, backed by rising demand for quality office space in the city.  This rental movement will take rents to INR 536 /sft/yr at the end of 2023 to INR 553 /sft/yr by end 2025.

 The city is currently

attracting major IT-BPM occupiers supported by the state government’s IT policy, SEZ benefits and talent pool availability. Submarkets such as GIFT City and SBD have been attracting the majority of occupiers.

AHMEDABAD

NEW SUPPLY

N EW S U P P LY ( M S F )

4.5

FORECAST

4.0

3.5

3.0

 The city is expected to witness a healthy supply of 2.8 msf by the end of 2023.  The majority of the new supply in 2023 is concentrated in the SBD and PBD submarkets, which is backed by strong demand.  New supply of ~4 msf is expected to enter the market in 2024 and 2025 spread across submarkets.  Beyond 2025, the supply is expected to remain low compared to 2024 and 2025.

2.5

2.0

1.5

1.0

0.5

0.0

2021

2022

2023F

2024F

2025F

2026F

2027F

Source: Cushman & Wakefield

AHMEDABAD

DEMAND & VACANCY

N E T A B S O R P T I O N ( M S F ) A N D VAC A N C Y R AT E ( % )

FORECAST

40.0%

1.6

35.0%

1.4

30.0%

1.2

 Office absorption is expected to reach 1.35 msf by the end of 2023 backed by rising demand from IT BPM and flex space operators.  This momentum is expected to continue for the next few years as flex operators are expanding and the city is attracting new occupiers.  Vacancy is expected to stay in the range of 30–31% by the end of 2023. The vacancy is likely to stay

25.0%

1.0

20.0%

0.8

15.0%

0.6

10.0%

0.4

5.0%

0.2

0.0%

0.0

2021

2022

2023F

2024F

2025F

2026F

2027F

Net Absorption

Vacancy Rate

range-bound in the coming years due to strong demand.

Source: Cushman & Wakefield

AHMEDABAD

RENT GROWTH

R E N T ( I N R / S F/ Y R ) A N D R E N T G R OWT H ( % P E R A N N U M )

FORECAST

570

3.5%

560

3.0%

550

2.5%

540

530

2.0%

 Rental growth is forecast at 2.9% for 2023 and will remain around 1.5 – 2% until 2025.  The rental growth is mainly driven by limited, superior grade space availability and strong demand in select submarkets of the city.  Rental growth is expected to stay low beyond 2025 after strong supply hits the market.

520

1.5%

510

500

1.0%

490

0.5%

480

0.0%

470

2021

2022

2023F 2024F 2025F 2026F 2027F

Rent (INR/SQFT/YR)

Rent growth (%)

Source: Cushman & Wakefield

BENGALURU

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 2023 is likely to witness net absorption of around 7.5 msf, which is lower than that in 2022.  Net absorption is likely to witness strong recovery (yearly average of 12-13 msf) in 2024 and 2025 on the back of healthy deal pipeline, positive economic outlook and stronger office space uptake.  City vacancy is expected to be somewhat elevated in 2024 and 2025 owing to high volume of supply.  Certain prime submarkets have recorded higher vacancy and are gradually

 Bengaluru is likely to witness supply of around 12 msf in 2023.  ~31 msf of total supply is expected to be completed during 2024–2025, with the Outer Ring Road submarket being the major (~40%) contributor.  Beyond 2025, average annual supply is expected at 11–13 msf.

 Rents remain largely range bound during 2022 and 2023.  Foreseeable pick-up in demand and flight-to quality to result in marginal rise in rents from 2024 despite consistent supply coming in.  Upward rental movement will take rents closer to INR 1180 sf/yr by end 2026.

 For most tech firms and GCCs, Bengaluru continues to offer a good ecosystem, thereby enabling the city to capture a healthy share of demand. Growing economic activity and India's rising

contribution towards enablement of digital

adoption will help the city's office market momentum in the near-to medium-term.

attaining a tenant favourable status.

BENGALURU

NEW SUPPLY

N EW S U P P LY ( M S F )

18

FORECAST

16

 New supply for 2023 is expected to reach ~12 msf, consistent with the supply seen in the previous year.  Supply during 2024 & 2025 is likely to total ~31 msf with the prime Outer Ring Road (ORR) submarket accounting for approx. 40% of new supply.  Average annual supply beyond 2025 is expected to range between 11-13 msf.  Emerging sub-markets such as Peripheral North are gradually seeing a rise in supply, although traditionally prime markets such as ORR

14

12

10

8

6

4

2

0

2021

2022

2023F

2024F

2025F

2026F

2027F

and Peripheral East will continue to dominate.

Source: Cushman & Wakefield

BENGALURU

DEMAND & VACANCY

N E T A B S O R P T I O N ( M S F ) A N D VAC A N C Y R AT E ( % )

 Bengaluru is expected to witness net absorption of around 7.5 msf in 2023, which is slower in comparison to 2022. Larger deals are taking more time to execute owing to current economic uncertainty.  The pipeline of deals remains strong as many occupiers are expected to increase space take-up in 2024 and 2025 owing to increased net hiring over last couple of years.  Quite a few pre-committed properties are expected to enter the market in the near future thereby helping net absorption strengthen in 2024.  Vacancies have risen in 2023 on the back of higher supply and slower leasing activity

FORECAST

14.0%

14

12.0%

12

10.0%

10

8.0%

8

6.0%

6

4.0%

4

2.0%

2

0.0%

0

2021

2022

2023F

2024F

2025F

2026F

2027F

and are likely to remain somewhat elevated up to 2025.

Net Absorption

Vacancy Rate

Source: Cushman & Wakefield

BENGALURU

RENT GROWTH

R E N T ( I N R / S F/ Y R ) A N D R E N T G R OWT H ( % P E R A N N U M )

FORECAST

3.0%

1,220

 Rentals remained range bound during 2022 and 2023 on the back of strong demand and supply forces. Developers tried to prioritise supply that had higher pre-leasing commitment.  Large incoming supply and a marginal rise in vacancies could gradually render prime submarkets such as ORR and Peripheral East tenant favourable. Preference for top quality assets continues to remain strong though, and there could be pockets where rental premiums are observed.  As demand strengthens in coming years, rents are gradually expected to rise, particularly from 2025 onwards.

1,200

2.5%

1,180

2.0%

1,160

1.5%

1,140

1,120

1.0%

1,100

0.5%

1,080

1,060

0.0%

2021

2022

2023F 2024F 2025F 2026F 2027F

Rent (INR/SQFT/YR)

Rent growth (%)

Source: Cushman & Wakefield

CHENNAI

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 Chennai is expected to witness new supply of 17.5 msf during 2023–2025, with the majority of this supply (51%) concentrated in the prime submarkets of South West and Suburban South.  Nearly 26% of the upcoming space (1.8 msf) in 2024 is pre-committed, mainly by BFSI and IT-BPM majors.

 Due to healthy demand, net absorption is forecast at 2.45 msf as of end-2023.  Vacancy is expected to increase to around 18.6% in 2023 due to large supply infusions anticipated for the entire year.  Net absorption of 2.5 msf is projected for 2024 recording a 2% y-o-y rise in net absorption from over 2.45 msf in 2023, largely driven by demand from IT BPM occupiers.

 Rents are forecast to grow at an average rate of 2.7% between 2023–2025, from INR 876 sf/yr by end-2023 to INR 904 sf/yr by 2025.

 South West, Suburban South and Peripheral South markets are likely to remain as prime office locations with enhanced connectivity to the CBD, on completion of Phase 2 of the Chennai metro project.  Chennai office market is anticipated to experience robust demand, particularly from the IT-BPM, Engineering & Manufacturing, BFSI and Flexible workspace operator segments, which

have shown significant growth in recent years.