Asia Pacific Office Rental Growth To Ease In 2023
ASIA PACIFIC – While Asia Pacific is forecasted to remain as the world’s fastest growing regional office market, office rental growth in the region is expected to moderate next year, according to a report published by Knight Frank on Friday afternoon (16 December, SGT).
Based on the property consultancy’s report entitled “2023: Pivoting Towards Opportunities Asia Pacific Outlook, average office rental growth in the region is projected to slow down from 3 percent this year to 2 percent by 2023 due to a number of factors.
“While the office sector has generally rebounded, a gloomy outlook lingers against the backdrop of economic headwinds. As businesses reassess expansion plans, leasing volumes should remain muted in the face of an increasingly inflationary scenario.”
“Growth in office rent should also moderate, as occupiers seek to add some flexibility to their portfolios to generate savings,” noted Knight Frank, adding that it has seen the rapid expansion of coworking space operators in central business districts (CBD) amidst a shift in preference for flexible office space by tenants.
In addition, the real estate consultancy expects Asia Pacific’s office vacancy to increase from 14.6 percent at present to 16 percent next year, as the region’s office supply is projected to reach about 134.55 million sq ft.
“Key drivers of leasing demand will continue to stem from professional services, finance and co-working sectors, with the inclusion of flight-to-quality requirements,” Knight Frank forecasted.
“Market conditions in 2023 will continue to favour tenants as highly amenitised buildings with sustainability credits are being completed and ready for occupancy. Considerations for ESG will take on a more prominent role in the office market as companies inch a year closer to their 2030 sustainability targets, which might spur relocation to buildings with high ESG credentials within their budgets.”
Furthermore, Knight Frank named Singapore as the number one of three office markets (aside from Seoul and India) to watch out for in Asia Pacific next year. This is due to the city-state’s limited office stock, and a flight to safety across the region is expected to support office demand in Singapore next year.
