Thought Leadership

New hybrid work models implemented on a large scale have created a major shift in the expectations of how the future office should be. Offices are now more intelligent, connected and accommodating to hybrid workers. Occupier organisations are planning to switch to flex office models instead of only choosing traditional leases. The change in office space preference and workplace expectations have posed challenges for landlords in Asia Pacific (AP) to keep up with market demands and to understand occupiers’ priorities.

In this study sponsored by essensys, IDC surveyed 180 leaders from occupier organisations, whose organisations are either using traditional lease or in flexible working spaces, and 180 leaders from office real estate organisations across six markets in AP, to capture their expectations, challenges and plans for future offices.

This InfoBrief then deep dives into Australia as a case study to understand the market demands and opportunities.

The findings provide insights to help landlords in AP understand the changing demands of the office real estate market and help them remain competitive in the office real estate landscape.

Key Takeaways:

• For occupiers, a seamless digital experience is highly important. All organisations are willing to pay more to have such an experience.
• Occupiers are using networks more in the dynamic spaces in office buildings such as the common lobby (76%), event and meeting spaces (62%), and food and beverage outlets (26%).
• Landlords in AP have not fully met the demands of occupiers on network and connectivity services, especially in areas such as speed, reliability, security and access.
• Landlords are aware that automated network management brings benefits such as controling networks across a portfolio (76%) and streamlining network infrastructure management (55%).
• Landlords also plan to implement more smart technologies for their portfolio in the next 3 years. Top technologies include network management, space management and touchless and sensor-based solutions.

2023 has brought about the implementation of favorable political and economic policies along with the revitalization of domestic demand and investment. As such, Greater China, the largest emerging market, is set to experience a significant rebound. The new economy real estate industry presents burgeoning growth potential.

Jointly released by Tricor and Asia Pacific Real Assets Association (APREA), ‘New Economy Real Estate in China – Market Review & Operational Guide 2023’ offers a thorough analysis of China’s new economy real estate industry, with specific emphasis on the logistics real estate market. It provides insights into the current market landscape, growth trajectory, and anticipates future trends.

Focusing on three key aspects, Engage, Evolve and Accelerate, the report provides real estate strategies being made by some of the leading global companies to strengthen processes, build resilience, and meet complex needs, with the aim to enrich the workplace experience.

During this time of heightened uncertainty, this report provides potential real estate strategies with recommendations for occupiers to:

• Engage: Preparing workplaces and workforces for change
• Evolve: Meeting future space needs and the demands of a hybrid workforce
• Accelerate: Applying technology to advance change and drive performance

Key highlights

• Across industries, occupiers are in the process of reassessing their current office footprint to determine the most optimal mix for their employees.
• More than 65% of workers are seeking more in-person time with their teams, while 70% of workers want flexible work options to continue.
• 66% of business decision-makers are considering redesigning physical spaces to better accommodate hybrid work environments.
• The growing urgency to attract and retain talent is prompting companies to consider alternative workplace solutions and new locations.
• Flex space has been brought to the forefront by the hybrid working model and has helped occupiers optimize costs and ensure employee flexibility.
• Integration of smart technology, digital infrastructure and smart facilities can help attract tenants and achieve greater operational efficiency, reduce energy consumption and higher customer retention.
• Companies across the globe are investing ESG and DEI initiatives, including green design, tech-enabled features that promote higher health & safety, wellbeing amenities, and inclusive workplace environments.
• Demand for green certified buildings will continue to rise as occupiers continue to seek eco-friendly buildings that meet environmental, energy, and health standards in their design, construction, and performance.

As the Asia Pacific region exits the pandemic and business activity returns to normal, corporate occupiers are placing more emphasis on employee productivity and on increasing office utilisation. With workplace transformation underway, there is strong demand to adapt and “build a better office” to meet the fast-evolving needs of employees and senior management. Additionally, occupiers should be actively identifying new opportunities and strategies to future-proof their portfolios. CBRE’s 2023 Asia Pacific Office Occupier Sentiment Survey, which features insights from more than 130 corporate real estate executives in the region, from more than 80 multinational and domestic companies, delves deeper into the future of work and the changing role of the office.Key findings include: 

• Policy on hybrid working is tightening
  • 68% of C-suites are focusing on increasing office attendance or improving work efficiency
  • 66% have policy enforcement on office attendance, including performance and financial consequences
     
• Companies are future-proofing their portfolio
  • 44% expect their CRE portfolio to grow in the next three years
  • Public transportation access, onsite F&B and sustainable building features are the most desired building features
     
• ‘Flight-to-green’ is becoming the next norm
  • 64% want to expand into ESG-certified buildings
  • 47% want to include data sharing in green leases
     
• Demand for a more refined workplace is increasing
  • 48% have adopted flexible seating; this is expected to increase to 80% by 2025
  • Increasing demand for focus space and small-sized meeting rooms

This report was originally published in https://www.cbre.com/insights/reports/asia-pacific-major-report-2023-asia-pacific-office-occupier-sentiment-survey

Insolvency resolution has been a bane for Indian policy makers and real estate lenders alike, with a poor track record in terms of recoveries and timeliness before the implementation of Insolvency and Bankruptcy Code, 2016.

In our latest report, we examine the development of the IBC relevance, impact and challenges faced in resolving insolvencies in the real estate sector. Our key findings deal with:

Resolution rates in Real Estate within IBC, compared to other sectors.

• Recovery rate, as a proportion of claims, where resolution has been achieved
• Key challenges specific to resolution of real estate stress
• Way forward in resolving real estate insolvencies

Global super-prime ($10m+) residential sales bounced back in Q1 2023, with 417 sales across the 12 markets tracked in Knight Frank’s Global Super-Prime Intelligence report, up 11% on the 376 recorded in Q4 2022 and the highest volume since Q2 last year.

This report was originally published in https://www.knightfrank.com.au/research/global-super-prime-intelligence-q1-2023-10221.aspx

Rents in global luxury residential markets are continuing to see strong growth. The Knight Frank Prime Global Rental Index rose by 8.5% in the 12 months to March this year – with rents in a majority of markets hitting new records.

This report was originally published in https://www.knightfrank.com.au/research/prime-global-rental-index-q1-2023-10269.aspx

• The Asia Pacific flex space market continues to display stable growth, with the total volume of flexible office space in the region reaching 87 million sq. ft. as of March 2023, an increase of 6% from September 2022.
   
• New flex space supply in Delhi NCR and Bangalore accelerated from 2022, with the two cities witnessing the addition of a combined 3.1 million sq. ft. of stock in Q1 2023. With leasing by flex space operators remaining robust in Q1 2023, the pace of new flex centre openings over the remainder of the year in these two markets is expected to be brisk. Weaker markets included Melbourne, where the potential insolvency of a local flex space operator resulted in a drop in flex office stock.
   
• Flex office penetration in the overall office market was steady at about 4% as of the end of March 2023. The proportion of flex space in Grade A office stock continued to increase, rising to 3.5% from 3.1% in September 2022, reflecting strong demand from flex space operators seeking to upgrade their centres to Grade A office buildings. 
   
• Ongoing economic uncertainty is strengthening the importance of portfolio flexibility and prompting a greater focus on cost management, driving occupier demand for flex space. CBRE’s 2023 Asia Pacific Occupier Survey found that more than half of respondents believe their portfolios to be under-allocated to flexible office space and intend to increase their use of it.
   
• Other key trends observed by CBRE in H1 2023 include tech firms’ continued dominance of usership of flex office space; CapEx concerns driving a preference for dedicated space such as enterprise solutions and strong demand for event space and access passes.

This report was originally published in https://www.cbre.com/insights/briefs/agile-real-estate-infographic-h1-2023-asia-pacific-flexible-office-market

While tenant enquiries and site visits remain frequent, momentum cooled from the previous survey. Although enquiries and inspections in mainland China were active, occupiers’ cautious stance resulted in a limited number of actual transactions.

Expansionary demand grew across the office and retail sectors but fell for industrial. Australia and Japan registered a rise in requirements for more space, while India continued to see robust new set up and expansion demand.

Two-thirds of respondents expect rents and incentives to stay flat. The view in mainland China is slightly negative, with rents forecasted to decline.

Despite falling slightly from the previous quarter, leasing sentiment in most markets stayed in positive territory. Sentiment in mainland China remains negative and will take more time to recover.

This report was originally published in https://www.cbre.com/insights/briefs/asia-pacific-leasing-market-sentiment-index-june-2023

Despite a challenging global economic environment and recent muted investment sentiment, the Asia Pacific commercial real estate market has remained largely resilient. In particular, the office sector remains an important asset class in the region, and one that investors should consider.

This report explores the opportunities presented by investing in the office sector in Asia Pacific, the supporting data and factors that differentiate this asset class from others, as well as the implications and potential strategies for investors.

Key highlights include:

• Deal flow in Asia Pacific remains resilient despite weaker investment sentiment
• The outlook for longer-term office demand is positive
• Asia Pacific is leading office attendance globally
• Price and rental correction has created a window of opportunity
• CBD offices can aid portfolio diversification

This report was originally published in https://www.cbre.com/insights/reports/asia-pacific-major-report-why-asia-pacific-offices-are-different-and-now-is-the-time-to-invest