Asia-Pacific office rents on the rise

The region emerged faster from the pandemic as compared to EMEA and the US where occupier conditions are still largely favourable towards tenants.

On an annual basis, the overall rental index is down 1.8% year-on-year (YoY), a stark contrast compared to the 4.1% YoY decline observed in Q3 2021.

Turning a corner

Of the 21 cities tracked by the index, 13 cities recorded stable or increased rents this past quarter. Seoul recorded YoY growth in 2021 at 4.6%, while Hong Kong recorded the highest quarterly growth at 2.6%. Beijing saw rental growth of 0.6%, a reversal of continuous quarterly rental decline since Q3 2018.

Overall, vacancy remains elevated at 12.8%, similar to 12.7% in Q3 2021. For now, office rents are likely to have bottomed out, thanks to improving business sentiments and a gradual and more sustainable return to workplaces, leading to the reduction of incentives and an increase in asking rents.

Covid complications

The ever-fluid Covid situation continues to be the key factor inhibiting a full-speed recovery for Asia-Pacific in 2022. Optimistically, with more governments beginning to take the step to live with the pandemic, making Covid-19 endemic, a gradual return to the workplace seems imminent now. Opportunities will begin to narrow for occupiers on prime office spaces in 2022, as office rates continue to strengthen.

The uptick in the last quarter of 2021 also snaps eight quarters of consecutive declines. While conditions remain tentative due to the Omicron variant, we expect rents to continue stabilising into 2022 with more markets in the region reaching an inflexion point in the rental downcycle.

Increased office leasing

As occupiers continually evolve their space strategies on the adoption of hybrid working styles, 2022 will be a year of reset and experimentation.

However, this does not mean less demand for office spaces. We expect leasing activity to strengthen into 2022, with demand underpinned by the integration of flexible space solutions and a pivot to quality spaces that emphasises wellness and employee experience.

For more insights, you can download the full report here.