High-quality Office Space Showing “Greatest Resilience”: JLL
GLOBAL – High-quality offices across the world are demonstrating the greatest resilience, even though the global office vacancy level rose 20 basis points to 14.5 percent in Q3 2022, according to a report published by Jones Lang LaSalle (JLL) on Monday evening (16 January, SGT).
The real estate consultancy said new office towers generally command a premium compared to older office properties. But the gap is widening at a faster pace as firms seek green-certified office buildings and those with excellent amenities.
For instance, the net absorption of office buildings in Hong Kong constructed in 2010 and beyond reached about 3.04 million sq ft. In comparison, that for older office properties built before that period hit -505,904 sq ft.
In the United States, the occupancy rate of new office space remained steady in the past year, even amidst the addition of new office supply and with the overall office vacancy peaking at 16.6 percent during the fourth quarter of last year.
On the other hand, the vacancy rate for older office buildings in the country increased from 13.5 percent pre-pandemic to 19 percent during the third quarter of 2022, even though such office towers are being torn down.
In Australia, prime grade office spaces or higher quality workspaces with green credentials and better amenities have seen higher leasing interest than lower grade office supply. JLL said this is evident as net office absorption across the country’s central business districts (CBDs) hit about 2.64 million sq ft in the 12 months to September 2022.
Conversely, the net office absorption of lower grade offices during the period reached -1.29 million sq ft. Notably, lower grade offices usually consist of ageing properties with smaller floorplates or assets that witnessed little capital expenditure over the past years.
JLL said the higher demand for high-quality office space is largely due to the environmental, social, and governance (ESG) goals of corporations, in addition to meeting the preferences of a new generation of employees.
“More companies are releasing carbon neutral or carbon reduction statements, and one of the ways they are meeting their objectives is by moving into office buildings that have high sustainability credentials,” added the property consultancy’s Research Director Paul Chapko.