Rethinking the Office Sector in Asia Pacific

The risk of office obsolescence, or at least the need to reposition assets, is rising across the world. Approximately 76% of stock in Europe and 61% of stock in the US will likely be impacted by the end of the decade. Arguably, Asia Pacific is better placed -- but not immune -- from these risks:

To get ahead of the curve and maintain market-relevant assets, landlords and investors should consider appropriate action as a matter of urgency. However, they need to understand the relative risks for their asset and for their market. X Markets that continue to develop rapidly such as mainland China and India have younger prime stock, but it often lacks sustainability accreditation. There are also significant swathes of secondary stock that will require attention, particularly in non-CBD locations which are facing obsolescence. Pressure will be maintained on both grades of assets as these markets have significant new supply pipelines. X More mature markets such as Australia, Japan, and Singapore are ahead of the curve on sustainability though landlords will feel continued pressure to improve their assets as government legislation raises the bar ever higher. This is potentially complicated by the older average age of existing stock. Furthermore, these markets are also at risk from slower growth drivers and heightened competition resulting from occupier churn.

Recognising this intra-regional variance, we introduce the concept of the optimisation lifecycle which provides a framework to assess an asset and identify the most appropriate optimisation strategy. This could be repurposing (finding a new use for an asset or site to maximise value) or repositioning (upgrading an asset whilst retaining its primary purpose).

PRIME GRADE STOCK LACKS ANY FORM OF SUSTAINABILITY ACCREDITATION IN ASIA PACIFIC 1

43%

However, the Asia Pacific region maintains strong growth drivers including the creation of almost 15 million new office jobs by 2030, a higher return to office post COVID than other parts of the world, potential de-densification of workplaces in some markets, together with more youthful office business districts. These factors provide a buffer against some of the more severe headwinds felt in other regions.

ASIA PACIFIC OFFICE STOCK IS OF SECONDARY GRADE 50%

1 Across 10 cities analysed: Beijing, Bengaluru, Delhi NCR, Hong Kong, Melbourne, Mumbai, Shanghai, Singapore, Sydney and Tokyo

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