APAC Grade A office rental recovery disappoints amidst resurging lockdowns

India, Australia, and other Southeast Asian markets saw weaker than expected recoveries.

While CBRE’s forecast of downward pressure on Grade A rents in core areas of most Asia Pacific markets has largely proven true in the year-to-date, the magnitude of the correction has been deeper than expected in just under half of all markets. 

CBRE says these include India, Australia, and some emerging Southeast Asian markets that have experienced lockdowns and other restrictions for extended periods following a resurgence of COVID-19 variant cases. This has prompted landlords to offer or maintain better terms including longer rent-free periods and higher incentives to attract tenants. 

Here’s more from CBRE:

In Tokyo and Sydney, a rise in sublease and secondary space has added to landlords’ woes, resulting in the weakest rental performance in the region in H1 2021. While these markets’ full-year decline will be milder compared to 2020, the resumption of rental growth may take longer than expected.

The biggest upside surprise has occurred in Auckland, where an uptick in leasing enquiries and stronger landlord confidence has prompted CBRE to adjust its full-year forecast from a rental decline to a rental increase. Other resilient markets include Singapore, Taipei and Seoul, for which CBRE has also upgraded its forecasts, with Grade A rents now expected to be higher than pre-pandemic levels by 2023. 

The performance of Greater China markets has been relatively in line with CBRE’s original forecast, which projected a slower rental decline in H1 2021 and stabilisation in H2 2021. 

The regional office market will continue to favour tenants in H2 2021. A shift in negotiation power towards landlords may occur in the coming years, with major markets in mainland China, India and Australia expecting a turnaround in 2023.