Despite growing cost-consciousness among tenants, office occupiers in the Asia Pacific (APAC) region remain willing to pay premium rents for high-quality, well-located properties, according to a recent report by Colliers. This trend persists even as APAC business leaders focus on optimizing resources, enhancing financial savings, and navigating challenges such as inflation, talent competition, the need for digital transformation, and increasing environmental sustainability pressures.
However, the market is showing mixed signals, according to Bastiaan van Beijsterveldt, Colliers’ Managing Director for Singapore. While rental rates for premium facilities in prime locations remain stable, expectations for rents have softened in buildings with persistent vacancies and secondary areas with significant upcoming supply.
Colliers’ report outlines key strategies for office occupiers looking to achieve cost savings. These include aligning office space strategy with business objectives, consolidating space, monetizing non-core assets, disposing of or sub-leasing excess space, and investing in technology and smart solutions to optimize space utilization.
Van Beijsterveldt anticipates that property owners will face increasing competition in the near term as more supply enters the market. Additionally, new hybrid work policies may prompt companies to reassess and right-size their office space according to evolving needs.
In this uncertain environment, Colliers suggests that occupiers could leverage market conditions in the first half of 2024 to negotiate more favorable lease terms, thereby avoiding higher rent reversions in the future.
Despite the challenges, the report highlights that office occupiers across the APAC region are still prioritizing high-quality and amenity-rich locations. This is especially true in markets like Singapore, where a flight to quality and limited available space drove a rebound in rents in the first quarter of 2024. Core Central Business District (CBD) and Grade-A office rents rose by 0.7% quarter-on-quarter to $11.57 per square foot per month after two consecutive quarters of decline.
Colliers also emphasizes that prioritizing sustainability initiatives and enhancing employee engagement and satisfaction will further contribute to occupiers achieving cost savings in the long term.
“Even in this challenging environment, offices remain the epicenter of work culture, albeit with greater workforce flexibility. Relocation decisions are increasingly driven by talent strategies and Environmental, Social, and Governance (ESG) objectives,” notes Mike Davis, Managing Director of Occupier Services for APAC at Colliers.