• Premium grade stock continues to outperform as occupiers strategize well located assets with green-building certifications. Robust incoming supply will offer opportunities to upgrade and relocate further adding upward vacancy pressure on older buildings.

• Leasing demand improves in Asia Pacific as financial; legal and tech firms implement return to office mandates for their employees with a growing confidence in the office as a primary place of work. 85% of organizations globally have a policy of at least three days of office attendance per week.

• Asia Pacific office investment totaled USD 48.8 billion for the full year, representing a 12% year-on-year increase supported by an uptick in core office asset acquisitions by global investors.

The Asia Pacific office sector demonstrated resilience in the fourth quarter, with leasing volumes increasing 4% y-o-y.  The flight to quality trend sustained momentum as occupiers continued to favor well-located, high quality and ESG compliant buildings, with proximity to amenities and connectivity being key differentiators for attracting talent.

India led the region in terms of leasing activity, followed by Japan, driven by domestic technology and financial services firms, as well as expansion of global capability centers. The return to office also contributed to leasing activity regionally, resulting in full-year net absorption of 4.6 million sqm – a 14% increase y-o-y and the highest level since the pandemic. However, recovery in Mainland China remained gradual, with quarterly net absorption comprising 12% of the regional total, down from a 10-year average of 30%, as tenants continued to rightsize and cut costs.

Q4 2024 saw 1.2 million sqm of new stock being completed with six markets recording additions of more than 100,000 sqm. Vacancy remains concentrated in decentralized areas and older buildings, with landlords offering higher rental incentives to spur leasing demand. Rents across Asia Pacific remained stable, though performance varied by market. Limited availability of premium grade supply drove rental growth in key areas, while Mainland China presented more favorable conditions for tenants.

Office investment volumes reached USD 13.9 billion in Q4, bolstered by global investor activity. Foreign investors were most active in Australia, Japan and South Korea while self-use buyers dominated in China. The bid-ask gap is expected to narrow and increase transaction activity in the coming year, alongside falling interest rates that may lead to yield compression in select markets.

Outlook
Leasing demand in Asia Pacific is expected to remain resilient throughout 2025. Despite growing geo-political risks and heightened market uncertainty, tech-enabled workplace utilization and a focus on employee well-being will continue to drive the flight to quality trend this year.