Asia Pacific’s Office Markets To Continue To Favour Tenants

ASIA PACIFIC – Knight Frank expects office tenants will continue to have the advantage over office landlords next year, according to an article penned by the property consultancy that was published on The Business Times on Thursday afternoon (28 December, SGT).

“Market conditions in 2023 will continue to favour occupiers, as highly amenitised buildings with sustainability accreditations are being completed and ready for occupancy,” wrote Knight Frank’s Research Head for Asia Pacific Christine Li.

“In the coming years, it will be vital for companies to create environments that support a variety of work styles for their employees, enabling them to do so comfortably and productively. As such, businesses are now at an optimal point in time to evaluate how they can best provide for their employees and take steps to curate the most desirable workplaces for them.”

However, Asia Pacific’s office markets are facing challenges arising from the structural shift towards more hybrid work in a post-COVID environment. Still, the relative resilience of demand for prime office space in the past few years have left the prime office market in a better position, with the office vacancy of such commercial properties remaining low in many markets across the region.

But while office landlords will focus on safeguarding their revenue stream, office tenants are expected to be more cautious in making lease decisions and may likely reassess the size of their office footprint because of the deteriorating economic environment.

“With ongoing anxiety about the economic outlook, occupiers facing incoming lease expiry are more inclined to renew their leases for shorter terms instead of expanding or relocating. Renewal cases are currently dominating some Asia Pacific markets, and we could see more of this phenomenon in the coming year,” Li noted.

Furthermore, while Knight Frank expects more shadow office space to emerge amidst the mass retrenchment in the tech sector, substantial office space reductions across the region “should be few and far between” thanks to a greater preference for in-office work in cities, such as Seoul and Tokyo versus those in the US and Europe, she added.