• Tenants concerned about rising fit-out costs may prefer renewing existing leases over costlier relocations, however demand remains strong for premium quality office spaces in prime locations, as occupiers prioritize future-proofing their portfolios through employee-centric designs and sustainability features.

• With an estimated 5.4 million sqm of new office space set to be delivered by the close of 2025, starting lease negotiations early will be key for mitigating cost pressures, securing high-quality premises, and adapt to evolving market conditions.

• Asia Pacific office investment hit USD 17.8 billion in Q3 2025, driven by South Korea and Japan, with focus on core assets with rental growth potential.

The Asia Pacific office sector demonstrated cautious optimism in Q3 2025, with occupiers continuing to prioritize premium, central locations despite persistent uncertainties and cost pressures. Regional leasing momentum strengthened during the quarter, though uncertainty around US tariff policy tempered overall sentiment. Asia Pacific rental growth maintained steady momentum, marking the seventh consecutive quarter of increases and delivering the strongest year-on-year growth in five years.

China and India dominated completions activity in Q3 2025. India’s performance was underpinned by strong demand from GCCs, BFSI and flexible workspace operators, supporting rental growth across its SBD markets. In Japan, forward commitments sustained leasing momentum and helped compress Tokyo’s vacancy rate, while Seoul experienced continued relocation-driven activity. In cost-sensitive areas of China, leasing decision timelines remained extended, with landlord flexibility serving as a key tool to maintain occupancy levels. Hong Kong’s substantial pre-lease transactions earlier in the year continued to bolster confidence in select prime assets. Singapore remained resilient due to its limited supply pipeline and ongoing recentralization trends, while Australian CBDs, particularly Sydney, benefited from constrained near-term supply.

Asia Pacific office investment activity showed selective improvement, dominated by domestic institutions, REITs, and end-users in markets demonstrating visible rental growth. Japan and South Korea continued to anchor transaction volumes, with underwriting focused on assets showing strong leasing velocity and stable income growth. Conversely, Greater China’s subdued rental outlook maintained investor caution and complicated price discovery.

Outlook
Global economic uncertainty will sustain measured decision-making through year-end, but market fundamentals for premium assets remain supportive, driving increased market segmentation. Premium office vacancy rates are expected to tighten further in supply-constrained CBDs, while certain markets will face extended lease timelines and higher incentives. In the near term, first-mover advantage will be crucial, with both occupiers and investors concentrating on assets offering clear rental growth visibility.