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Asia Pacific Property Markets: Themes for 2021

Industrial & Logistics sector and technology occupiers lead the way

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Brighter prospects ahead



After the COVID-19 recession of 2020, prospects for 2021 look brighter.

 

We see the muted demand and heavy supply to continue to weigh on the office sector, though not in all cities. In contrast, the industrial & logistics sector remains in firm expansion mode.

 

In addition, Colliers' experts outline four of the key themes that Colliers expects to drive APAC property markets over 2021 – China Plus One strategy, technology occupiers, flexible workspace, and sustainability – and assess their implications for property occupiers and owners.

 

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Outlook for Office markets


  • We expect aggregate leasing demand to rise 96% from last year’s weak level, but see new supply at 1.6x demand, which should depress rents by 6.1%

  • Rising vacancy should peak at about 15% at year-end 2023

  • High vacancy will be concentrated in China and India; vacancy will be lower in popular occupier locations like Sydney, Melbourne and Singapore

  • Most APAC office markets should favour tenants over the next year

“In aggregate, APAC office markets should see a strong pick-up in demand in 2021, but high supply and rising vacancy will pressure rents and limit price growth except in popular occupier locations like Singapore, Sydney and Melbourne.”

 

Andrew Haskins_circle

Andrew Haskins
Executive Director | Research | Asia

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Outlook for Industrial & Logistics


  • The shift from physical to online retail has driven demand for logistics space

  • Expansion in cold chain, new warehouse designs and new infrastructure projects should fuel demand further

  • Most APAC markets now favour landlords

  • Rents should pick up in the big Chinese cities in 2021, with 3.0% growth in Shanghai

“Demand drivers for the logistics & industrial sector remain very firm, with most markets favouring landlords and rents steadily rising. The sector’s popularity with investors should rise further, with cap rates for logistics assets trending down over time, notably in China.”

 

Andrew Haskins_circle

Andrew Haskins
Executive Director | Research | Asia

Key themes for Asia Pacific property markets in 2021

China Plus One Strategy

China and the US may drift further apart economically, but slowly. Most MNCs will stay in China, but seek new markets to cut costs and spread risk.

 

What this means for Occupiers:

Demand from high-end occupiers for logistics & industrial space – and to a lesser extent, office space – should persist in China, Japan, Taiwan, Vietnam and India.

 

What this means for Owners:
Logistics & industrial asset prices should stay strong across APAC. However, with demand and supply out of balance in many cities, office capital values are unlikely to rise in the near-term.

 

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Technology Occupiers

Asia Pacific technology occupiers led by large, expanding Chinese groups will account for over 20-25% of office demand by 2025. This will create new benchmarks for space, talent and the workplace across the region.

 

What this means for Occupiers:

Asian technology occupiers will lead demand for office space. As a result, they should dominate leasing markets – helping determine rents, incentives and deal structures.

 

What this means for Owners:
We see a preference among investors for key technology locations such as Sydney, Melbourne, Singapore, Bengaluru and Hyderabad. We expect landlords to focus on technology occupiers.

 

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Flexible Workspace

Flexible workspace operators will seek off-CBD opportunities, as occupiers look outside traditional business districts. Many APAC centres such as Beijing, Shanghai, Seoul, Sydney, Auckland and all Indian major cities have office districts on the fringes, which are increasingly viable as business locations.

 

What this means for Occupiers:

Occupiers are implementing hub-and-spoke models with space closer to residential areas; flexible workspace can help meet this need.

 

What this means for Owners:
Occupiers will continue to demand shorter and more flexible leases; owners will have to follow suit. Prices of decentralised and business park office assets may stay firmer than prices of office assets in central business districts (CBD).

 

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Sustainability and Climate Change

Sustainability will start to drive property investment and leasing decisions, as most Asia Pacific nations adopt ambitious carbon neutrality goals, together with the US.

 

What this means for Occupiers:

Large occupiers will conduct portfolio reviews to understand which buildings do not match carbon neutrality targets and to determine an action plan. All new sites for expansion will require sustainability certifications.

 

What this means for Owners:
Environmental, social and governance (ESG) criteria will start spreading in property. New developments will focus on sustainability credentials.

 

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