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Asia Pacific Market Outlook Soundbites


Ada Choi, CFA, Head of Occupier Research & Head of Data Intelligence and Management, APAC

Cynthia Chan, Associate Director, Research, APAC

Okubo Hiroshi, Head of Research, Japan

Sam Xie, Head of Research, China




With occupiers forced to respond to short term disruption caused by the pandemic, most companies opted to postpone major leasing decisions for the duration of 2020.

The relatively successful mass adoption of remote working is prompting a rethink of workplace design and utilisation, challenging traditional decision-making processes based on headcount growth and forcing companies to take a more holistic view of portfolio planning.

Locational preferences are being re-examined to cater to a more dispersed and decentralised workforce. Companies are prioritising portfolio agility and resilience to guard against sudden economic fluctuations and an uneven recovery.

Strategies for business, workplaces and the workforce and real estate portfolios are set to converge in 2021 as occupiers crystalise a fresh new approach to creating the offices of the future.


C-suite executives will take a more hands-on role in formulating longer-term corporate real estate strategy. Landlords and investors will need to refine their building hardware and tenant services to remain competitive.

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Although employees in most Asia Pacific markets have now returned to the office, CBRE expects many companies to retain the hybrid working models they adopted in response to the pandemic. While employees will be able to choose between working remotely or at the office, CBRE’s latest survey found that more than 70% of managers would prefer to have office-based staff1. With offices here to stay, occupiers must overhaul workplace design and configurations to strengthen health and safety protocols and enhance user experience.

Grade A net office absorption in 2020 totalled just 31 million sq. ft. GFA, the lowest annual total in more than a decade. This was due to a halt in leasing activity following the onset of the pandemic combined with a phase of evaluation to consider the impact of remote working.

CBRE expects Asia Pacific office demand in 2021 to increase by 5% over last year, supported by an improvement in the general business outlook together with the resilient performance of selected office-based industries. Leasing demand will be led by the technology and financial sectors, both of which have been largely unaffected by the pandemic. The rebound in domestic consumption will support the resumption of leasing demand from companies in the retail and consumer products industries.

The structural shift to tertiary industry in emerging Asia will provide another tailwind for office space demand. Services sector employment in emerging Asia has registered a cumulative growth rate of 15%-30% over the past ten years. While the sector currently accounts for under 50% of total employment, there is significant room for growth, with the corresponding figure in the U.S standing at around 80%.

Nevertheless, many occupiers will continue to seek short term opportunities to extract cost savings from their real estate. Occupiers are expected to retain a cautious attitude towards CapEx in H1 2021, with leasing activity likely to pick up in the second half of the year as companies gain confidence in the recovery. Expansionary demand is likely to be dominated by domestic and regionally-based companies due to their quicker approval processes and relatively lower adoption of remote working.

Having been among the first countries in Asia Pacific to see office demand recover to pre-pandemic levels, leasing activity in Mainland China is set to gain further momentum in 2021. While the caseload in India remains high, companies are now welcoming employees back to the office – a trend that should support new demand this year.

Limited new supply will inhibit net take-up in Tokyo and Seoul. Leasing momentum in Australia, Hong Kong SAR and Singapore will remain dominated by smaller requirements but net absorption is expected to return to positive territory.


Cost savings and CapEx constraints will be the key determinants of leasing decisions in H1 2021. Landlords must be more proactive in offering incentives to secure new lettings, while retaining tenants will be a priority.

1Asia Pacific The Future of the Office Survey, CBRE Research, October 2020.

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New Grade A office supply in Asia Pacific is projected to reach 58 million sq. ft. NFA in 2021, a slight increase on the 55 million sq. ft. NFA registered in 2020.

As in recent years, new supply will be concentrated in Mainland China, India and Southeast Asia (excluding Singapore and Vietnam), where completions due to come on stream this year will account for an average of 5% – 10% of existing Grade A stock.

In markets such as Beijing, Shanghai, Shenzhen, Jakarta and Delhi NCR, where space availability, particularly in decentralised locations, is already very high, upward pressure on vacancy will intensify. Elsewhere, low vacancy in Manila and Bangalore will shield these cities from the impact of new supply.

While accounting for a small portion of overall office stock, an increase in sub-lease and shadow space resulting from space returned by foreign banks and professional services firms will further add to vacancy pressure in Hong Kong SAR, Singapore, Tokyo and Sydney. However, much of this space is available in core CBD and high-quality buildings and is therefore more likely to be absorbed.

CBRE expects Asia Pacific Grade A vacancy to rise to an all-time high of 16% by end-2021 due to the combined impact of subdued demand, large new supply and excess sublease/shadow space.


Higher vacancy will expand occupier choice and provide tenants with the upper hand in negotiations. Tenants’ preference for high quality, tech -enabled and wellness-enhancing buildings will support continued flight to quality. This trend will be more prominent in Mainland China, Australia and Indian cities where vacancy is peaking.

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The widespread adoption of remote working and employees’ reluctance to engage in long commutes are prompting occupiers in the region to rethink their office locations.

In Asia Pacific, rapid urbanisation and infrastructure improvements have helped many cities establish new decentralised business hubs, attracting occupiers seeking lower costs and higher efficiency. Examples include North Sydney and Parramatta in Sydney; Noida and Gurgaon in the Delhi NCR; Greater Hongqiao in Shanghai, Yokohama in Greater Tokyo; and Kowloon East in Hong Kong SAR. CBRE’s Asia Pacific The Future of the Office Survey found that 31% of Asia Pacific companies are considering adopting a hub-and-spoke office model. A further 30% of respondents said that the pandemic had made it less important to maintain large headquarters offices in CBDs.

While some companies are evaluating the feasibility of establishing a network of offices spread across different locations, this will require them to balance employees’ needs with working efficiency and cost control. Locations providing excellent transport links; proximity to the CBD; accessibility to residential catchment areas; affordable rents; and retail amenities will be keenly sought after.

Supported by improved infrastructure and new high quality stock, office leasing activity in Asia Pacific has begun to shift to areas outside the CBD. Major non-CBD business areas accounted for 45% of leasing volume in 2020, up from 36% in 2016. Occupier choice in non-CBD locations will further expand in 2021, with around 46% of new supply due for completion expected to be in decentralised areas.

While some new business districts will require more time to develop and establish themselves as attractive destinations, mature non-core districts already hold considerable appeal to occupiers seeking cost savings, high quality new buildings and good accessibility.

In terms of rents, CBRE expects those in decentralised areas to exhibit a more stable performance than those in CBD areas in 2021 to a low base effect and better affordability.

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The feasibility of the hub-and-spoke model depends on the design of individual cities and the maturity of their decentralised business hubs. Markets such as Shanghai, Hong Kong SAR, Tokyo, Singapore, Sydney and Bangalore are most suited to the model. This trend is likely to prompt landlords to offer a more diverse range of building types and locations to retain tenants.




The Asia Pacific Office Rental Index declined by just 4.7% in 2020, with Hong Kong SAR, Singapore, Sydney and Shenzhen markets to register a correction of more than 10%. In comparison, the Index contracted by more than 30% in the six quarters following the onset of the Global Financial Crisis (GFC) in mid-2008. The resilience displayed since the pandemic owes much to the fact that key office occupying industries such as technology, finance and professional services have been largely unaffected by the economic downturn. In addition, the Asia Pacific office market has also grown in size and maturity since the GFC, ensuring less volatility in rental performance.

The regional office leasing market nevertheless remains weak and will continue to favour tenants in 2021. Landlords are expected to remain accommodative and will need to offer low rents and high incentives to maintain occupancy. Grade A rents are therefore likely to remain under downward pressure for the duration of the year.

CBRE expects Grade A rents in core locations of most markets to decline within a range of -5% in 2021.

  • Seoul, Taipei, Ho Chi Minh City and Bangkok will see stable or slightly higher rents.
  • In Greater China, rents in most tier I cities will decline at a slower pace than in 2020, with submarkets outperforming. The Guangzhou CBD will be the first market to see rents stabilise. Hong Kong SAR, which registered the region’s sharpest rental decline in 2020, is expected to see a mild fall over the course of the year.
  • Incentives in most Pacific markets are unlikely to increase further, meaning that effective rents are likely to decline at a slower pace. The Perth CBD could see incentives fall from current high levels, while Melbourne will lag in terms of recovery.
  • In India, landlords in key outsourcing destinations such as Bangalore will hold rents firm but rents other cities will continue to face downward pressure in the first few months of 2021.
  • The rental decline in Tokyo and Manila Makati is expected to accelerate along with rising vacancy.

As the current rental downcycle is quite mild, the cumulative change in rents since 2018 (assuming a three-year lease) may still be positive. This means that spot rents for new leases could still be higher than ongoing rents for tenants seeking relocations or renewals.


The mild downcycle and burgeoning economic recovery make it imperative for occupiers to capitalise on current weak leasing sentiment to negotiate better terms before the window of opportunity closes. Landlords in oversupplied markets are advised to prioritise securing good quality tenants over obtaining higher rents. Property owners must also be more accommodative by offering incentive packages, shorter terms and optionality in new leases.

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Manish Kashyap
Global President, Advisory & Transaction Services
Advisory & Transaction Services
+65 6326 1220
+65 6225 1987
Dr. Henry Chin
Global Head of Investor Thought Leadership
& Head of Research, APAC
+852 2820 8160
+852 2810 0830
Ada Choi
Ada Choi, CFA
Head of Occupier Research, APAC
& Head of Data Intelligence and Management, APAC
+852 2820 2871
+852 2810 0830
Cynthia Chan
Asia Pacific
+852 2820 2839
+852 2810 0830