Optimistic outlook for office space as growth continues

Companies are also placing a greater focus on cost management and cost consciousness, leading to a drive to reduce operating expenses. 

Rents are set to rise in the region, so many companies will look to expand in decentralised locations to save on costs and help them consolidate operations.

Another trend is for multinational occupiers to favour disposing of real estate that they own and diverting capital to other business-investment options. 

“Conversely, many domestic occupiers see real-estate acquisitions as an investment strategy as well as an effective way to manage expenses, and so they are likely to increase their buying activity,” Mark Lampard, managing director of corporate solutions in the Asia-Pacific region, said yesterday.

Many markets in Asia are set to see less stock added than the annual norm. In such markets as Hong Kong, that will lead to more pronounced increases in rents.

But not all Asian cities are capacity-constrained. Chengdu, Bangkok and Ho Chi Minh City are all cities that are expected to see a significant increase in supply, which will more than likely lead to flat rental environments.

With governments continuing stimulus measures in Japan and Europe, demand for exports will likely improve. Asia, still heavily dependent on exports, is set to benefit from any pick-up in global economic growth. The election of pro-business governments in India and Indonesia should also be positive for those nations, Colliers believes.

The office-leasing market in Asia should remain healthy. Although US interest rates are expected to rise, rates remain low by historical averages. Multinationals are also benefiting from declining energy costs, with oil having slumped considerably.

Both factors are helping to improve profit margins, a welcome sign at a time when top-line revenue growth is expected to be only mildly positive. Growth in gross domestic product is forecast to pick up by 40 basis points across Asia.

In China, companies in the e-commerce and finance industries are set to show exceptional growth, thanks to supportive government policies. 

In India, energy and construction groups will be expanding and demanding more office space.

On the policy front, some of the cooling measures introduced in various markets in recent years will be relaxed, particularly when more realistic levels of supply lead to an increase in existing office stock.

With the cost of borrowing rising and yields largely compressed for prime assets in core locations, investors will have to behave differently to produce returns. 

Value-added opportunities will achieve that purpose with landlords repositioning existing projects or converting them for other use, the firm says.