APAC office leasing demand climbs 10% in Q3

Declining supply and flight to quality push rental growth.

The Asia-Pacific office market experienced robust growth in the third quarter of 2024, with leasing demand increasing by 10% year-over-year, according to Mike Davis, Asia Pacific Managing Director of Occupier Services at Colliers. 
"This is a 7% increase year to date," Davis highlighted, marking a strong recovery trajectory for the region’s office sector.

The surge in demand has been accompanied by a 10% decline in new office supply year-to-date, creating upward pressure on rental prices in Grade A office markets. “That’s led to rent increases in many of the Grade A rental markets,” Davis noted, emphasising the premium segment's resilience.

A notable driver behind the Q3 performance was the continued trend of “flight to quality.” Occupiers are gravitating toward premium office spaces that emphasise sustainability, productivity, and convenience. “Occupiers are increasingly prioritising quality space in green-certified buildings,” Davis said.

Companies are also focusing on properties near transportation hubs and those offering modern amenities like food and beverage options. The emphasis on high-quality office spaces is reshaping the market, leaving older, less competitive buildings behind.

Markets such as Singapore have been standout performers, with leasing demand climbing by over 30% in Q3 alone. However, cost considerations are influencing tenant decisions in other markets. Companies in locations like China, Hong Kong, and Indonesia are increasingly leveraging market conditions to secure cost savings.

"Many companies have been reluctant to spend capex dollars to relocate in this environment, and this has led to many companies deciding to renew in place," Davis explained. While some tenants are opting to stay put, concessions like fit-out allowances have encouraged relocations, particularly to premium properties.

With strong demand for Grade A properties and a focus on sustainability, Davis sees the sector remaining stable in the short term while setting the stage for a strong start to 2025.