Buy vs. Build: Analysing Office Economic Rents in Asia Pacific

Elevated construction costs, changing land values and asset repricing have significantly altered underlying assumptions for new office developments in Asia Pacific. Investors are looking more closely at ‘economic rents’, which measure the rental income needed to justify development costs, and are reassessing office developments across the region.

Most markets in Asia Pacific have reported significant growth in economic rents over the past five years, led by Australia. In Asia, Singapore, Seoul and Beijing have seen the greatest growth.

CBRE expects more office developments in Asia Pacific to continue to be postponed as investors find it difficult to justify commencing work on new schemes. This will constrain the supply pipeline in the medium term. As a result, the region’s office markets will adjust to the tighter supply-demand imbalance, which will help rental growth align with the change in construction and land costs.

With the office outlook improving and pricing at the top of the cycle in most Asia Pacific markets. Investors are expected to continue to target acquisitions of existing stock. Markets with strong rental prospects such as Australia, Japan, India, Korea and Singapore, will attract the lion’s share of investment demand in the second half of 2025.

This Viewpoint explores the factors that are affecting rental assumptions and how this will impact the Asia Pacific office demand-supply balance in the coming years.