In Singapore, both AI-native occupiers and firms in traditional sectors are seeking premium, strategically located properties that can serve as their Apac headquarters, CLI said (Photo: Samuel Isaac Chua/EdgeProp Singapore)
An AI-enabled economy will likely hasten a redistribution — not a broad-based contraction — of occupier demand for offices and business parks in Asia Pacific (Apac).
That is according to Singapore-listed global real asset manager CapitaLand Investment (CLI), going by its engagement with occupiers across Singapore, China and India.
CLI pointed to a K-shaped divergence in the office and business park sectors. Demand is shifting towards high-specification, well-located and infrastructure-ready properties, while commoditised spaces may face structural pressure.
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“As dispersion widens, performance will be increasingly driven by asset selection and execution rather than broad market movement,” the office owner and operator wrote in a recent research paper.
For investors, this highlights the need for a more selective allocation approach. Core capital should prioritise office and business parks with enduring demand visibility, while value-add opportunities could be pursued to “unlock relevance” through asset repositioning, CLI’s strategy and research team noted.
At the same time, capital should be rotated away from structurally challenged stock, and towards sectors and strategies benefitting from AI-driven demand — such as data centres and tech-enabled logistics — and complementary capital structures such as real estate private credit.
Demand for physical workspaces will become more selective, concentrating in locations and assets that can support innovation, coordination and human-AI workflows that are still-nascent but increasingly complex, in CLI’s view.
For the research report, CLI’s commercial management team gathered insights through engagements with existing and prospective tenants of its offices and business parks in Singapore as well as gateway cities of China and India. These included top-tier clients from the banking, financial services, insurance and technology sectors.
Its in-house research team also analysed data on leasing trends and renewal patterns across CLI’s office and business parks portfolio.
Infographic: CBRE, CLI Group Research (April)
Rather than simply serving as a site for routine work, the workplace is evolving into a hub for decision-making, innovation and human-AI collaboration.
Companies that are seeing AI-driven efficiency gains thus require less space for back-office and support functions. CLI said some occupiers are actively consolidating their physical footprint as headcount-to-desk ratios tighten.
Across the firm’s portfolio, tenants are increasingly prioritising spaces that are infrastructure-ready and can support data-intensive workflows and collaboration. “These factors feature prominently in both new leasing decisions and renewal negotiations,” it stated in the report.
The flip side is that spaces unable to meet these requirements appear to be losing relevance. Real estate consultancy JLL predicted that over time, older stock with limited upgrade potential may face occupancy losses and value reduction.
The impact of AI on the workforce goes beyond headcount and cost reduction. CLI also sees AI redistributing jobs, though it points out that the transition to higher-value roles will not be without challenges, and some frictional unemployment is expected as workers adapt and reskill.
While AI is automating routine tasks in many sectors, it has also created new categories of work, and AI adoption has the potential to generate superior revenue and productivity outcomes. Industries most exposed to AI saw three-times higher growth in revenue per employee compared to those least exposed, according to a PwC report.
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Furthermore, early adopters of AI are expanding their workforces, in particular, for specialised, higher-skilled roles that can work alongside and leverage AI capabilities. Office employment in the Apac region could grow by 3.5% in 2026, noted real estate consultant CBRE.
That said, office occupiers’ expansion plans vary significantly by country and sector. CLI observed that across Apac, the technology sector saw the highest proportion of occupiers who are planning to expand — led by China, Singapore and India.
In contrast, fewer than half of the tenants in other sectors indicated that they intend to expand their office spaces, CLI noted. These sectors include wealth and asset management, professional services, insurance, traditional banking, life sciences and retail.
Chart: Cushman & Wakefield, CLI Group Research (April)
In Singapore, both AI-native occupiers and companies in traditional sectors — including financial institutions, law firms and professional services firms — which are integrating AI into their operations are seeking premium, strategically located properties that can serve as their Apac headquarters, CLI said.
For example, major AI players in the quantitative finance sector are operating at CLI portfolio properties CapitaSpring and Raffles City Tower.
The firm added that the greater use of AI workflows, analytics and digital tools is driving tenants to look for high-quality, well-located and amenity-rich offices, which reinforces the flight-to-quality trend.
At the same time, there are limited new Grade A office completions in Singapore’s core CBD, keeping the market supply constrained with vacancy rates of about 4–5%.
Within the business park segment in Singapore, earlier declines in occupancies due to hybrid work and back-office offshoring have stabilised.
“After previous over-consolidation, tenants are exploring expansion,” CLI wrote. It has not seen reduced space requirements or downsizing at business parks due to AI, despite caution on long-term commitments.
Business parks with technology, biomedical and research tenants remain resilient, supported by nearby research institutions, hospitals and the growing AI ecosystem in the city-state. CLI cited as an example the one-north innovation cluster, where the upcoming Kampong AI is expected to anchor about 70 additional AI firms in the area.
In India, AI adoption is driving a shift towards more complex and strategic work being outsourced to global capability centres (GCCs) — specialised offshore hubs set up by multinational corporations to manage essential functions. As a result, this could boost demand for high-specification office spaces in the country.
“India’s large and young AI-ready workforce is translating directly into rising occupier demand, as global corporations increasingly channel AI-related investments into the country,” CLI said.
GCCs continue to be the largest driver of Grade A office demand in India, and are expected to make up about 35–40% of total leasing demand in 2026. New growth may come from mid-market companies — that is, firms with global revenues of US$100 million ($127 million) to US$1 billion — as well as global unicorns and emerging sectors, according to CBRE research.
With rising AI adoption, MNCs are now increasingly insourcing higher value, IP-critical work that was previously outsourced to third-party IT services and consultancy firms. GCCs in India are thus taking on strategic roles that emphasise innovation, efficiency and technological advancement.
CLI noted that tenants in India are focusing on integrated technology parks and campus-style environments to accommodate larger, more complex and innovation-led teams.
For example, a global software development services provider has leased more than 125,000 sq ft in International Tech Park Hyderabad, part of CLI’s portfolio, for the past few years and is planning further expansion in 2026.
In its report, CLI stated that occupancy levels across well-located, institutional-grade technology parks in India have consistently exceeded 90%, with double-digit rental increases recorded on lease renewals.
While broader market conditions remain challenging, leasing demand in China is becoming more concentrated in specific submarkets and asset types that are aligned with AI development.
“This suggests AI is becoming a more measurable demand driver at the submarket level, but remains insufficient to absorb the broader supply overhang,” CLI said.
It added that AI is emerging as a meaningful source of new leasing demand. In 4Q2025, companies in the technology, media and telecommunications sector — such as AI application enterprises, large language model developers and quantitative technology firms — took up 39% of new leased areas in Beijing, 33% in Shenzhen and 16% in Shanghai.
However, this comes as economic headwinds and a supply glut continue to affect both the office and business park markets in the country.
There has also been some space consolidation due to AI-driven optimisation, such as an MNC technology firm reducing its headcount by around 3–4% at its Shanghai office and a Chinese insurance firm cutting its footprint by about 10,000 sq m (107,639 sq ft) at Xi’An Business Park.
Moreover, well-capitalised technology giants in China are increasingly developing their proprietary headquarters instead of leasing space, which means not all AI-driven demand is flowing to the institutional leasing market.
Nonetheless, CLI noted early signs of demand stabilisation in the market. Full-year net absorption exceeded two million sq m for the first time in three years. In Beijing, vacancy improved to its lowest level in three years, supported by expansion in the technology, media and telecommunications sector.
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