Market Focus: Supply and Shadows
What do increasing levels of office supply and sub-leasing mean for
occupiers and investors?

Introduction: Clouds on the horizon

The Covid-19 pandemic has had a significant impact on sentiment within the office markets across the region. Lockdowns, travel restrictions and working from home have directly impacted the utilization of office space, while demand, measured as net absorption, is significantly down this year compared to previous years. This is being driven by three major factors:

1. With most Asia-Pacific economies in a recessionary phase, corporate occupiers from a range of sectors are expected to face challenges to their bottom lines. This will continue to translate into softer office demand across the region as occupiers undertake cost-cutting measures.
2. Following on from (1), the general uncertainty in the economic outlook is now discouraging occupiers from spending CAPEX on fit-outs for expansions or relocations at the current time.
3. With the global working from home “experiment” being undertaken in may markets, some occupiers are reviewing their strategies and space requirements. While it is unlikely to be an either/or, many corporate real estate leaders are considering adding more flexibility into their portfolios, potentially impacting office demand.