Cautious quarter for office leasing in APAC

Cautious quarter for office leasing in APAC

8 November 2019

According to the latest Asia Pacific Office Trends report by CBRE, office leasing demand remained weak in Q3 2019 due to continued slow global economic growth and the ongoing U.S.-China trade conflict.

Occupiers turned more cautious and shifted their focus to lease renewals amid increasing reluctance to approve the large CAPEX required for relocations.

Demand in China tier 1 cities was slow while ongoing socio-political unrest in Honk Kong ensured occupiers stayed in wait-and-see mode. Many firms in the SAR have even delayed decisions around cost-saving initiatives including decentralisation.

Tech firms continued to drive the take-up of office space but requirements were noticeably smaller this quarter. Most large tech occupiers have already completed major expansionary moves and are now only leasing space to house specific functions such as R&D.

Following rapid expansion in previous quarters, agile space operators are now focusing on increasing occupancy in existing centres. Some international operators have turned more reluctant to commit to new leases but several well-capitalised firms are still looking to cautiously extend their footprint.

Occupiers are expected to stay in wait-and-see mode and renewals are likely to take longer to negotiate. Leasing demand will remain subdued in most markets.


Slower economic growth and trade conflict with the U.S. continued to drag on leasing activity. Demand was led by TMT, finance and professional services firms.

The government’s steps to remove limits on foreign ownership and business scope in the financial sector and loosen the lending environment via lowering the RRR and LPR could stimulate new set-up and expansion among foreign institutions and higher corporate CAPEX in the coming months.

Hong Kong

Leasing activity weakened further over the quarter as economic headwinds strengthened. Demand was led by coworking and insurance companies.

With corporates set to remain cost-conscious, decentralisation activity in non-core submarkets is likely to weaken. Limited source of demand, coupled with ample availability, is set to exert downward pressure on rents over the next 12 months.


Companies continued to relocate to larger premises and establish new offices although several key economic indicators weakened during the quarter.

Pre-leasing for new Grade A supply due to come on stream in Tokyo in 2019/2020 is progressing well. Occupiers with upcoming lease expiries are advised to being their search for space sooner rather than later as relocation options will remain limited.


Although the quarter saw steady absorption of office space across the three major districts, new demand wakened in tandem with the slower economy.

New supply in the YPD next year will be substantial, forcing landlords to offer higher incentives to attract tenants. The GBD is set to remain a landlord’s market. Incentives will continue to fall and rents are likely to continue to rise until new supply comes on stream in 2021.


Economic uncertainty coupled with a mismatch in rental expectations between occupiers and landlords resulted in measured leasing activity.

The business outlook will remain challenging amid lingering economic uncertainty. New projects in the pipeline will start pre-leasing earlier than usual as space take-up is slowing.


The period saw robust leasing demand despite slower economic growth. Bangalore, Hyderabad and the NCR accounted for the bulk of activity.

Leasing demand is expected to remain robust in the short-term, led by the tech sector. Occupiers will continue to build greater agility into their portfolios by crafting an appropriate mix of core space and flexible options.


Leasing activity continued to stabilise as tenants await new supply, with renewals accounting for the majority of leases signed.

Future supply is limited in Perth with new space not due until 2023, allowing current vacancies to be absorbed. Sydney will remain a landlord’s market, with most new supply already fully pre-committed, pushing tenants into renewals.