Asia Pacific accounts for a bigger share of global net absorption of office space
November 20, 2012 / By Myles Huang
The Asia Pacific Prime office market has accounted for a bigger share of global net absorption in recent years. Prior to the onset of the GFC in 2007, the region accounted for just one-fifth of the combined total net absorption of AP, Europe and US, as compared with a 50% share by the US alone. Since then, the US and Europe have seen significantly slower activity levels. On the other hand, net absorption in AP has quickly rebounded since the GFC to a record level in 2011. As a result, AP accounted for an average of 50% of global net absorption last year and is still expected to account for a similar proportion this year (see Chart 1).
Chart 1: Global Net Absorption of Office Space
Source: Jones Lang LaSalle, 3Q12
Net absorption levels in Asia Pacific are being supported by demand from an increasing number of MNCs coupled with maturing domestic firms, which require a large amount of Prime office space. It is also the result of large supply additions arising to meet this strong demand. Many markets, which either lacked quality space until recently (e.g. China and India) or had outdated office stock (e.g. Singapore), have undergone or are currently undergoing a major construction cycle. Between 2004-07, AP accounted for less than one-third of global completions but its share is expected to grow to over 50% this year, as construction activity in Europe and the US moderates due to weak occupier interest (see Chart 2).
Chart 2: Global Completions of Office Space
Source: Jones Lang LaSalle, 3Q12
Cautious corporates coupled with an uncertain global economic climate is likely to see 2013 net absorption in AP similar to this year’s level but below the record level in 2011. Demand is expected to remain subdued in the major financial centres, while remaining relatively stable in China, India and emerging South East Asia, but slightly stronger in North Asia. On the other hand, demand in the US and Europe is likely to remain below the long-term trend until there is a clear sign of an economic recovery. As a result, AP is still expected to lead global net absorption and completions. Given AP’s continuing economic outperformance, the region’s Prime office markets (core and emerging) should continue to move up the global league in terms of size and importance, thus opening up more opportunities for occupiers of space.
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