Asia Pacific Office Leasing

Tech Firms To Account for 20-25% Of Asia Pacific Office Leasing

ASIA PACIFIC – Tech firms, led by expanding major Chinese companies, are forecasted to make up 20 to 25 percent of office leasing demand across Asia Pacific (APAC) 2020 to 2025, according to a report published by Colliers International on Monday (8 February).

“We expect large Chinese technology enterprises to account for more than 4.0 million sq m of new office leasing across APAC over 2020-2025,” said the property consultancy in its report entitled “Asia Pacific Property Markets: Themes for 2021”.

As Chinese tech firms represent 70 percent of the market capitalisation of tech companies across Asia, Colliers International estimates that total leasing demand from all tech firms in the region would reach more than 5.5 million sq ft, or 20 percent of the aggregate demand during the 5-year period.

The real estate consultancy explained that the above figures were derived utilising revenue growth forecasts and employee sales productivity from Bloomberg to predict headcount growth and workspace demand in the future.

Colliers International noted that the implications of this trend for tenants is that Asian tech firms would dominate leasing markets across the region, influencing rental rates, incentives and deal structures.

On the implications for landlords, property owners are expected to prioritise tech firms as tenants. But real estate investors will favour key technology locations like Singapore, Sydney, Melbourne, Bengaluru, and Hyderabad.

Meanwhile, office rents in Singapore and Auckland are forecasted to rebound in 2021. Both cities, as well as Melbourne’s CBD and Bengaluru are projected to record average growth of over 2 percent per annum in 2020 to 2025.

However, weighted average net effective rents fell 5.4 percent across Asia Pacific last year due to the recession and mismatch between demand and supply caused by the pandemic.

As for office vacancy across APAC, it edged up by 3.3 percentage points to 12.9 percent in 2020, and is forecasted to peak at 15 percent by the end of 2023 before falling.

“Vacancy rates of over 13 percent will be concentrated in China and India, while rising supply will also lift vacancy in Tokyo, Asia’s largest office market, notably in 2023. Popular occupier centres such as Singapore, Melbourne CBD and Sydney CBD should hold vacancy in the 5-10 percent range over most of the next five years,” added Colliers International.

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