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Asia Pacific’s office supply is expected to surge this year as completions peak in several gateway cities and emerging markets, according to Cushman & Wakefield.
Total supply of new office space will account for around 13 percent of this year’s current inventory, the property consultancy said, while sustained construction will see overall supply in these two years make up around 16 percent of existing stock.
While emerging markets will account for around 60 percent of the completions, several gateway cities will also see significant office supply being delivered.
Office supply in Singapore, for instance, will account for around 14 percent of the city-state’s existing Grade A inventory, or the third highest after Shanghai and Beijing.
In a number of the region’s cities, this wave of supply will be established in new submarkets and expanded business districts, like Barangaroo in Australia and Bonifacio Global City in the Philippines.
“This wave of completion comes after a number of years of modest supply, which has seen vacancies tightened in the last two years,” said Sigrid Zialcita, Cushman & Wakefield’s managing director of research for Asia Pacific.
Cushman & Wakefield said the expansion of office supply will add to the amount of investable stock within the region, which will expand the scope of real estate investments with a much greater range of opportunities across the risk spectrum. “Interest in the region’s gateway markets have remained intact and the expansion in stock will go some way in addressing the limited assets for investments resulting in a deeper and possibly more liquid market,” said Gary Hollis, Managing Director, Head of Capital Markets, Asia Pacific.
The report noted that supply pressure will “likely result in diminished expectations of rental growth as vacancy levels are expected to edge up.”
However, the growth of the BPO sectors should support demand in some countries like India and the Philippines.
In China, the strength of domestic demand and a structural shift of the economy to services-led growth will drive office leasing sector there.
Meanwhile, the office sector in Australia’s biggest markets is set for modest improvements. Sydney’s CBD benefits from structural changes to the Australian economy, particularly with the services sector in New South Wales experiencing a resurgence in employment.
“The timing is not ideal but still, we do not expect a dramatic increase of vacancies in the region,” said Zialcita.
“While market dynamics will shift, vacancy rates in the core markets this year are expected to increase moderately to 10 percent, up from the current seven percent level, which remains manageable”.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories emailnikki@propertyguru.com.sg
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