Does it surprise you that Beijing, Shanghai and Tokyo have the most modern office stock in Asia Pacific? This is the result when you compare the highest rented 30 buildings in each office market in the region. Comparing the average age of buildings across the region yields some other interesting results.
With China’s recent construction boom, unsurprisingly, Beijing and Shanghai have the newest office stock with an average age of just 8 years which is only marginally lower than Tokyo’s 8.4 years, with much of the most recent stock having been developed after the 2011 earthquake.
Predictably, Hong Kong sits at the top of the age chart at with the oldest average age of 21.6 years. This is due to very limited land supply in the core Central District, multiple ownership issues and most new supply being in the periphery CBD and decentralised areas where lower rents are payable. Australian offices are the second oldest in the region, averaging about 20 years, a legacy of the construction boom in the 1980s. The completion of International Towers Sydney in the Barangaroo precinct will lower average stock age in Sydney by 3 years when delivered this year.
Singapore and India’s stock average is 11 years, with Seoul being slightly older at 14 years. In Singapore, a quarter of the current Grade A space in the CBD was built starting 2010, primarily due to the new land supply in Marina Bay.
Source: JLL
Looking at the age of buildings prompted us to start thinking about the issue of building replacement costs and whether it is possible for investors to buy new Grade A buildings at a ‘discount to replacement cost’ of old Grade B buildings in core markets. Clients seem to be talking about this a lot and our preliminary research does show that this is indeed possible in some markets. Keep a look out for more on this topic!
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