Key APAC Occupier Trends in 2022

Amid the challenging environment brought about by the pandemic, Asia Pacific’s real estate sector remained resilient in 2021. This recovery is expected to continue this year, with office demand in the region on course to normalise as companies return to the workplace.

Expansionary demand is also returning to the market. CBRE’s 2022 Asia Pacific Real Estate Market Outlook forecasts net absorption for the office segment to grow by up to 10% this year, while a recent CBRE survey of investors in Asia Pacific shows that investment appetite for office space is on the rise.

At a recent CBRE event on the 2022 outlook for the Asia Pacific real estate market, I had an insightful discussion with CBRE colleagues across research and the business on what the future holds for the region. In my view, there are four key trends that will shape the office sector and occupier agendas in 2022 and beyond:

1) A return to pre-pandemic decision-making timelines

At the height of the pandemic, we observed that occupiers had slowed their real estate decision-making process, with many adopting a short-term lease renewal policy in order to reassess the longer-term requirements of their business. We are now seeing a return to pre-pandemic decision-making timelines for occupiers.

Many occupiers who have key hub locations where they expect to maintain a long-term office presence are seeking to commit to long-term lease transactions – and can therefore benefit from lower rentals – or exploring purchasing assets as owner-occupiers. We saw a marked increase in this activity in the second half of 2021, and expect this to continue in 2022. 

We also continue to see an uptick in flight-to-quality demand – which was largely on-hold at the height of the pandemic – as health, safety and well-being have rocketed to the top of most occupiers’ agendas. Sydney, Hong Kong and Singapore are among the most active markets seeing this trend, but we expect other major markets in Asia Pacific to follow suit this year.

2) Hybrid working becomes the norm, but productivity remains a concern

Hybrid working has arguably become more widely accepted in other parts of the world, but less so in Asia given the average size of residential space, multigenerational living arrangements, and even the corporate culture in some markets. However, as Covid-19 shifts from pandemic to endemic, we are seeing more clients in Asia seeking to incorporate hybrid working into their long-term strategy. 

Coworking has a role to play in this, with occupiers increasingly trialling flex space – often at limited scale initially – across all of Asia Pacific. This is being driven by start-ups, notably the tech and fintech sectors, which have experienced rapid headcount growth over the past 12 to 18 months. Life sciences companies are also early adopters and large occupiers of flex space given the amount of M&A and corporate divestiture underway in this sector.

One prediction for major markets in the region is the emerging trend of “Core and Flex”, where an occupier takes a traditional lease in conjunction with a flex agreement. This would typically be in the same building, and in some markets could even be by the same building owner acting as both traditional landlord and flex operator. This is starting to gain traction, and we are working with occupiers and the landlord community in markets such as Singapore, Sydney and Melbourne to explore this emerging trend further.

3) The continued rise of ESG

While discussion around environmental, social and governance (ESG) in real estate is not a new phenomenon, the topic has clearly become a key agenda item for every corporate occupier that we are speaking to in Asia Pacific. Encouragingly, we are seeing discussion turn into action with the launch of the first holistic Green Leasing policy by a corporate occupier towards the end of 2021, and we expect this trend to continue this year.

There are undoubtedly a number of ways that ESG will shape the real estate occupier agenda going forward, which we will explore in more depth in future articles. This is certainly a topic that cannot be ignored.

One interesting topic of debate is whether occupiers will pay a rental premium to lease buildings with better ESG criteria – a green rental premium. Green rental premiums will undoubtedly vary across markets, but in my view, Australia has been leading the way in the region given that they were early adopters of ESG policies, and this will be a market to watch. Other markets are catching up fast, and we are seeing developers in markets like Singapore and mainland China adjust their building specifications to cater to future occupier demands. CBRE has been actively engaging landlords, developers and occupiers in these markets to better understand what occupiers want to see in their workplace from an ESG lens.

4) Talent as a key competitive differentiator

The way in which companies navigate all of the aforementioned trends will have a significant impact on their ability to attract and retain talent, which is crucial to success as organisations worldwide grapple with ‘the Great Resignation’.

Indeed, the flight-to-quality trend and a greater focus on health, safety and well-being will be key differentiators in companies’ ability to hire and retain top talent. As occupiers seek to adapt to the rapidly changing trends in the region, it is imperative that they create the right workplace experience to stimulate ideas and employee engagement, especially for new joiners and those who are entering the workforce for the first time. The changing role of the office is leading to a gradual change in daily working timetables, as well as changes to the ways in which employees interact with the office and their colleagues. Companies that get this right will be well-placed to benefit from a positive impact on engagement, connectivity and productivity, and will likely gain a competitive edge in the market.

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