Reworking Lease Expires

LOOKING FURTHER AHEAD, MOST OF THE 25 MARKETS ACROSS ASIA PACIFIC (88%) WILL REMAIN OVER-RENTED UNTIL THE END OF 2025, BUT THAT IN 2026 THE SITUATION WILL SHIFT SUCH THAT 50% OF MARKETS ARE UNDER-RENTED, AS RENTAL GROWTH RETURNS. THIS SHOULD BE A SIGNAL TO TENANTS TO EXAMINE THEIR LEASE RENTS IN RELATION TO THE CURRENT MARKET AS THEY COULD BE PAYING ABOVE MARKET RENT. Furthermore, occupiers should also consider the year-to-year trajectory of market and lease rents (Figure 4). For example, Melbourne is forecast to become under-rented in 2025, though arguably the greatest level of over-renting (i.e. biggest discount between market rents and leases) is occurring now through to 2024, suggesting action should be taken within the next 18 months. In contrast, both Singapore and Bangkok are expected to become under-rented in the next 6 months, suggesting more urgent action is required.

Looking at both rental forecast and the standard length of a lease in cities across Asia Pacific, Cushman & Wakefield sees the “windows of opportunity” where occupiers could experience the most favourable conditions in relation to their lease expiry (Table 1 overpage). Of course, market conditions can, and do change and so this should not be a set and forget exercise, especially if the window of opportunity is several years distant. Rather the analysis should be regularly updated to keep it contemporary. This is where in-depth market knowledge is integral, not only to assist on advising current and future market conditions but also to identify strategies that capitalise on those conditions. Advisers who work exclusively for the tenant can canvas a deep pool of landlords to access to the latest space availabilities. Furthermore, they can recommend best practice regarding issuing space requirements and subsequently evaluating all submissions received. Together, these factors help tenants navigate a market more effectively and efficiently.

FIGURE 4: LEVEL OF UNDER- / OVER-RENTING FOR SELECT MARKETS, 2022-2026

Lease expiry period

Melbourne

Bangkok

Singapore

Source: Cushman & Wakefield

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CUSHMAN & WAKEFIELD

REWORKING LEASE EXPIRIES