SINGAPORE (EDGEPROP) - Office space regional net absorption for Grade A offices, an indicator for office demand, declined 45% to 6.9 million sq ft in 2Q2020 in the Asia Pacific region, down from 10.1 million sq ft in 1Q2020. However, it still remains in the positive territory, according to Cushman & Wakefield’s latest report Reclaim 2020: H2 Insights.
Widespread rental decline is seen across the region in 2Q2020. Despite some green shoots of economic recovery, office, retail and hotel sectors will “lag behind and continue to soften over the next six months”, the report states. Cushman & Wakefield projects rental declines to go up to 15% for the entire year.
Vacancy rates vary depending on market conditions. Tokyo entered the pandemic with a vacancy rate of less than 2%, while other markets such as Malaysia, Jakarta and some in China had vacancy rates of over 20%.
The Singapore market is expecting Grade A office supply to hit a peak of 1.9 million sq ft in 2022 before it falls to 0.5 million sq ft in 2023.
Generally, new enquiries for space decreased as corporate occupiers put business decisions on pause, but some bright spots can be seen in the region. In China, Tier 1 markets are witnessing positive net absorption after a negative 1Q2020. Hyderabad and Mumbai in India recorded 3.7 million sq ft of positive net absorption in 2Q2020, although it is still a 50% decline q-o-q and the weakest result since 2013.
The report states that these positive results stand in stark contrast against 22.8 million square ft of negative net absorption recorded across US markets, which shows the resilience of the region in 2Q2020. It also posits that cost-cutting measures and flexible work policies will change the need for office space and drive market outlook over 2021 and beyond.
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