COVID-19 To Have Modest Impact On Office Space Demand, Says Survey

SINGAPORE – Property investments across Asia Pacific have fallen significantly due to dismal market sentiment arising from the coronavirus outbreak, reported The Business Times on Saturday (26 September).

In fact, real estate investments worldwide declined by 29 percent year-on-year to US$321 billion in 1H 2020.

Additionally, companies had to suddenly change how they do business and how they strategize their real estate portfolios amidst extensive urban lockdowns and a large shift to flexible work arrangements.

Nonetheless, the commercial property market is managing to adapt to the upheaval caused by the pandemic, with some companies pushing through with their office space deals.

For instance, Chinese tech behemoth Tencent is establishing a regional headquarters in Singapore. Facebook also agreed to lease the entire 730,000 sq ft of available office premises in New York’s Farley Building in August, whereas Ping An Insurance forked out HK$11.27 billion (S$1.45 billion) to secure office space in Hong Kong’s West Kowloon in April, in line with its expansion plans for the Guangdong-Hong Kong-Macau Greater Bay Area.

However, some firms are re-looking or downsizing their office space needs. For example, streaming giant Netflix lambasted work from home as something negative, while Fujitsu said it will slash its office footprint by 50 percent in the next three years.

Also, most businesses in Asia Pacific are adopting a more cautious stance. Based on research conducted by property consultancy JLL on occupier sentiment, 76 percent of 200 corporate property executives envision that COVID-19 will have a modest impact on their demand for office space.

Almost two-thirds of the respondents also expect that the number of their office sites will remain unchanged.

This bullish outlook stems from their strong trust with the authorities, with 70 percent of those surveyed saying that they are confident in their government’s capability to give guidance on the virus outbreak and lessen future risk.

With 58 percent of the respondents saying that their staff’s health and wellness is their key focus, it’s not surprising that 94 percent of them will retain or increase their share of office space with high specifications, as such premises come with interiors and amenities promoting the health of their occupants.

Investors are keeping a close watch on this trend and on the needs of their lessees, with many eager to invest money on properties again.

Based on separate research by JLL of 38 global and regional investors that have assets under management (AUM) collectively worth over US$1.8 trillion, 52 percent of the polled investors believe that the commercial property market would recover in 1H 2021.

In particular, prime office space remains an appealing strategic asset class, with 88 percent of respondents saying that they will either retain or increase their holdings.