Covid 19’s impact on the Asia Pacific office market has been that buoyant demand leading into the pandemic was quickly stymied as corporate occupiers sought to limit cost exposures and assess their real estate needs. In line with this, vacancy has increased and rents have softened across most markets, pushing them towards greater tenant-friendly status. However, corporate occupiers must be aware that these changes may not bring the cost savings they might expect and that in some markets, tenants may have to pay more on a new lease than they were paying on the last year of an expiring lease. 

The year ahead

Looking ahead, landlords are expected to continue experiencing headwinds in many markets across Asia Pacific. While the regional economy recovered to pre-pandemic levels in the fourth quarter of 2020, with forecast growth of 6.5% in 2021, recovery in commercial office markets has lagged behind.

The regional one-year rental outlook is for an average decline of around 1.7%, but with great variability around this average. Rents in Hong Kong are forecast to fall a further 13% over 2021, continuing the trend that started in early 2019. Rents in Hanoi and Tokyo are also under comparatively significant downward pressure due to forthcoming supply. In contrast, rents are forecast to increase the most in Seoul, at around 5% for the year. Seoul’s office market has been especially resilient during the pandemic so far, even posting growth of 3% in 2020, thanks to strong tenant demand and limited supply.