Laying Down Roots

Cushman & Wakefield, the world’s largest privately-held commercial real estate services firm, in its latest Asia Office Forecast report, ’14 for 2014 – Top Trends to Watch’, highlighted the healthy demand forecasted for office space across Asia in 2014. Cushman & Wakefield forecasted that the office demand is likely to reach 60 million square feet (msf) in all 30 major cities tracked within Asia Pacific.

Sigrid Zialcita, Managing Director of Research for Asia Pacific said, “The relatively favorable macroeconomic climate should continue to buoy employment and ensure healthy demand for office space across the region. However, demand is not likely to grow at its customary rapid pace in 2014, being marginally slower than the previous year.”

Tokyo is forecasted to see the highest office absorption among the 30 cities in Asia in 2014 expected to be recorded at 7.6 msf. It remains the region’s top location for office absorption and is followed by Bengaluru, India at 2nd position and Manila at 3rd, which are expected to witness 6.25 msf and 5.9 msf of net absorption in 2014.


Rank City Absorption in msf Rank City Absorption in msf
1 Tokyo 7.6 16 Singapore 0.8
2 Bengaluru 6.3 17 Ahmedabad 0.6
3 Manila 6.0 18 Mumbai 0.5
4 Guangzhou 4.9 19 Melbourne 0.5
5 Shanghai 4.9 20 Kolkata 0.4
6 NCR 3.7 21 Hanoi 0.4
7 Shenzhen 3.3 22 Bangkok 0.4
8 Chengdu 3.2 23 Sydney 0.3
9 Pune 3.0 24 Ho Chi Minh 0.3
10 Jakarta 2.7 25 Taipei 0.2
11 Hyderabad 2.5 26 Perth 0.2
12 Seoul 2.3 27 Hong Kong 0.2
13 Beijing 1.6 28 Auckland 0.1
14 Kuala Lumpur 1.5 29 Brisbane 0.1
15 Chennai 1.2 30 Adelaide 0.1

*Data includes Grade A properties in CBDs across 30 major cities in Asia Pacific. With few exceptions in emerging markets such as India, we include office locations outside core CBDs that are well-located, well leased and are suitable for institutional grade portfolios. For Tokyo, absorption includes all grade significant space.


Abenomics shoots Tokyo’s predicted absorption to the top in 2014.

Tokyo CBD is expected to see the highest absorption of office spaces in the APAC region. The total estimated absorption is expected to be 7.6 msf. Demand for office space is expected to remain buoyant and vacancy levels are expected to fall. The market is influenced by the positive sentiment across the board on account of Abenomics and the increased profit margins on account of weakened Yen against the dollar. Todd Olson, Executive Managing Director, Japan, Cushman & Wakefield said, “Landlords are becoming increasingly bullish on the prospects for future rental growth. Some uncertainty remains, however, with the 2014 Consumption Tax increase and necessity to implement real structural economic reforms to ensure a long-term recovery. Investment activity is up drastically, as investors view Japan as a good opportunity with rental growth and the upcoming 2020 Summer Olympic Games.


In the Top 10 cities to witness highest absorption in 2014, China emerged strong with 4 cities including Guangzhou (4th rank) and Shanghai (5th rank), Shenzhen (7th rank) and Chengdu (8th) among them.

In China, office demand is expected to maintain its brisk pace, except in Beijing’s CBD, where steep rents and low vacancies will limit take-up levels and fuel decentralization. Additionally, newly announced reforms to open up are expected to have a meaningful impact on real estate markets in other Tier 1 and 2 cities. Given the economic recovery and the rapid development of the hi-tech, financial, trading and technological sectors and professional services sector, it will further drive leasing activity in tier II cities. Randall Hall, Executive Managing Director, Greater China, Cushman & Wakefield said, “Influenced by the general economic slowdown, China’s office market will record a more stable and mild development in the following one or two years. The decentralizing trend of tenants’ site selection will grant more opportunities to emerging submarkets in Tier 1 cities and Tier 2 gateway cities.”


On the other hand, Office demand in Hong Kong CBD is expected to remain below trend next year with continued lack of strong growth drivers. Demand from tenants will be conservative but positive, as they focus on cost containment while the economy gradually improves. A brisk rebound in demand, notably for prime space, is unlikely in the near to midterm and this will keep rents in Greater Central relatively flat in 2014. Despite a muted rental growth, Hong Kong CBD will still remain as the most expensive office market in the region with rents ranging above 160USD per square feet per year. John Siu, Managing Director, Hong Kong, Cushman & Wakefield said, “A brisk rebound in demand, notably for prime space, is unlikely in the near to medium term and this will keep rents in Greater Central relatively flat in 2014, followed by more consistent growth in 2015.”


Singapore is also expected to remain below trend due to slow recovery in the financial sector but the overall demand is expected to benefit from a stronger economic performance next year. Leasing will largely pick up by end of 2014 and gradually strengthen in 2015 as pre-leasing of new office buildings gathers momentum. Toby Dodd, Managing Director, Singapore, Cushman & Wakefield said, “CBD rents have reached an inflexion point in 2013 and are poised for further growth in 2014-15, with below-average supply of prime space expected within these two years. Pre-leasing of space in new projects will pick up ahead as tenants will be interested in securing leases in a number of iconic projects that will near completion after 2014.”


With economic recovery on the slower track, leasing activity in Taipei is expected to remain moderate next year and tenants could hold off making any strategic decisions. A large-scale upcoming supply, in addition to existing availabilities, will continue to favor tenants over in 2014. Michael Hu, Associate Director, Office Leasing, Taiwan, Cushman & Wakefield said, “The leasing market continues to show signs of constraint as the rental has no significant growth. Overall vacancy continues its upward trend with the new supply of more than the size of a Taipei 101 Building (57,000 pings).”

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