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Southeast Asia office demand surges

June 20, 2018 / By

Office take-up in Southeast Asia accelerated over the last five quarters

Due to slower economic growth, office take-up in Southeast Asia grew at a slower pace of 5.5% annually in 2014-2016, compared to circa 8% annually in 2010-2013. However, over the last five quarters, office demand started to recover. In 1Q18, office take-up in the region grew by 6.8% yoy.

Looking forward to 2018-2022, we expect office take-up in Southeast Asia to stay strong, growing at 6% annually, amid GDP growth of 5% p.a.

Chart 1: Office net absorption in Southeast Asia (yoy)
Source: JLL Research

Strongest demand growth came from Singapore and Jakarta

The sharpest turnaround in office take-up in the last four quarters came from Jakarta and Singapore. Both markets have experienced high supply growth in 2016-2017 but also strong absorption as occupiers move into the newer buildings from 2017 onwards. Smaller tenants moved into some of the vacant spaces while some of the older buildings have been adapted for other uses.

In both Jakarta and Singapore, stronger economic growth underpinned occupier expansions. Downsizing in the oil and gas sector in Jakarta has stabilised with some expansions expected this year. In Singapore, major leasing deals signed by technology companies in 2017 included Facebook and Grab for 250,000 sq ft and 100,000 sq ft of space, respectively, in Marina One.  Examples of co-working operators which have expanded include JustCo’s space in Marina One, Ucommune’s second co-working office in Suntec City and The Great Room’s space in Centennial Tower.

Flexible work spaces are expanding rapidly in Asia

The flexible space sector in Southeast Asia is expanding rapidly in line with growth in Asia Pacific. In Singapore, flexible work space already take up 2.8% of occupied office space, after growing over 30% CAGR in the last three years.

From 2014 to 2017, flexible space stock across Asia Pacific recorded a compound annual growth rate of 35.7% – much higher than in the United States (25.7%) and Europe (21.6%) over the same period. What initially began as a platform for freelancers and startups, flexible space providers are now tailoring their offering to accommodate corporate users.  These corporate users are experimenting with coworking with pilot schemes.

For more details, refer to our note “Southeast Asia office demand surges

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