Here’s a rundown of how APAC office rents will fare for the rest of this year
Rents are forecast to decline by an average of 1.7% across the region.
According to a recent report by Cushman & Wakefield, looking to the year ahead, landlords are expected to continue experiencing headwinds in many markets across Asia Pacific.
While the regional economy recovered to pre-pandemic levels in the fourth quarter of 2020, with forecast growth of 6.5% in 2021, Cushman & Wakefield says recovery in commercial office markets has lagged the economic recovery but is rapidly adjusting to the post-pandemic landscape. Markets conditions are now more reflective of typical real estate drivers and just as markets entered the crisis at different points in their cycle, so too will they exit it.
Here’s more from Cushman & Wakefield:
The regional one-year rental outlook is for an average decline of around 1.7%, but with a certain amount of variability around this average.
At one end of the spectrum, rents in Hong Kong are forecast to fall a further 13% over 2021, continuing the trend that started in early 2019. Rents in Hanoi and Tokyo are also under comparatively significant downward pressure in light of forthcoming supply, with annual forecast rental decline of 10% and 7% respectively. Similarly, tier 1 markets in mainland China also have robust supply pipelines, which have been pared back due to the pandemic but still remain significant. There are also local trends of decentralisation with tenants moving out of CBD locations to peripheral areas. Together the factors are expected to drive rental declines of up to 5% in 2021 in Shenzhen, with smaller declines in other tier 1 mainland markets.
At the other end of the spectrum, rents are forecast to increase the most in Seoul at around 5% for the year. Seoul’s office market has been especially resilient during the pandemic so far, even posting growth of 3% in 2020 thanks to strong tenant demand and limited supply.
Indian markets have successfully endured the downturn so far and although tenant demand in 2020 was down 57% year-on-year, it still amounted to almost 20msf of net absorption across the top eight cities. The outlook for the year ahead is for rents to remain stable across most cities as the country focusses on managing the latest wave of the pandemic.
Australian markets experienced comparatively strong rent declines in 2020 as sub-lease space increased and landlords increased incentives to match lower levels of demand. For the most part rental adjustment is over in these markets, with average forecast decline in 2021 at around 2%. Similarly, rents in Singapore are expected to post minimal decline in 2021.
Overall, this is broadly positive news for any corporate newly entering any of these flat or declining markets. In short, they should be paying less than a new market entrant 12 months ago.
Click here for the full report.