In 2022, corporate occupiers will need to be increasingly proactive in deciding their space requirements, as tenant-friendly tailwinds start to subdue. Here’s why:
1. Strong demand
As employees start their return to the office, office demand is growing exponentially. 2021 office demand across the region is expected to be 77% above 2020 levels, and in 2022, demand is expected to increase further - before returning to pre-pandemic levels in 2023.
2. The war on talent
The labour market will tighten over the year ahead, with acute shortages expected in some industries. With the office being a key differentiator in retaining and recruiting talent - instead of ‘downsizing’, corporates are instead looking at refurbishments and new fitouts to better reflect their culture and facilitate more collaborative work environments.
3. Lack of options
Many markets across the region are entering a period of restrained supply over the next two years. New supply for 2022-2023 in 15 markets is forecast to be below the 2015-19 average.
4. Economic growth
Asia Pacific is forecast to return to world leading growth in the second half of the year, which continues into 2023. GDP Growth of 4.5% per annum is forecast for the next two years.
5. Rental savings not guaranteed
With the current supply and demand dynamics, rents are now forecast to be at their lowest in late 2021 through to early 2022, approximately 12 months earlier than envisaged at the start of this year. At the same time, rental growth is expected to be relative muted over the next few years at around 1% to 2%. However, occupiers should be wary of expecting reductions in the corporate real estate costs, as highlighted in Cushman & Wakefield’s recent Rent Variability Index report, as they may end up paying more on the new lease than on the last year of their expiring lease.