A growing number of corporate occupiers plan to extend their office footprint in Asia Pacific in the long term, while also pursuing greater flexibility and new hybrid working models, says the international real estate services company CBRE.
About 50% of respondents signalled an intention to increase the size of their real estate portfolios over the next three years, a substantial increase from just 23% in October 2020, according to the 2021 Asia Pacific Future of Office Survey, released this week.
Leading the charge are Asian companies that are displaying a stronger appetite for expansion, particularly tech companies and some investment and insurance firms. Among multinationals, while consolidation and flight-to-quality remain a focus, some still have a healthy long-term appetite for expansion, among them tech firms.
Fuelling occupiers' expansion plans is a significant improvement in business sentiment across the region. A significant majority, or 71% of respondents, believe current business conditions are getting better, marking a substantial improvement from 22% in April 2020 and 48% in October 2020. Confidence was highest in Greater China and the Pacific, while India and Southeast Asia were the least optimistic.
While the unpredictability of coronavirus infection rates will continue to weigh on the pace of recovery for the foreseeable future, growing momentum in vaccination programmes is strengthening corporate confidence, CBRE analysts said.
FLEXIBILITY & CHOICE
That confidence is reflected in a desire to bring employees back to the office, while offering a greater degree of flexibility and choice. Once the pandemic is fully under control, respondents expect employees to work from the office more frequently than they work from home, with hybrid working becoming a norm.
At the same time, organisations have also begun to establish remote work policies that are subject to guidelines or company approval, enabling managers to determine employees' work schedules and eligibility for remote work. CBRE believes such a change in working patterns indicates that hybrid working will only have a limited impact on future office demand.
"For Thailand, the experiment with remote working during the lockdown has yielded encouraging results, and several companies intend to continue allowing employees to do so," said Roongrat Veeraparkkaroon, head of commercial transaction services with CBRE Thailand.
"In turn, it is prompting a re-evaluation of their workforce strategy with a focus on cost savings on office space. But rather than putting a damper on office demand as a result of the anticipated shift to more remote working, CBRE believes occupiers will continue to demand a physical workplace, albeit a digitally enhanced one that provides a variety of settings to facilitate different working styles and is more effective in supporting collaboration, teamwork, engagement and innovation."
"Offices are set to drive collaboration and connectivity more than ever, and workplace design will need to be adjusted and recalibrated accordingly," said Ada Choi, head of occupier research, data intelligence and management for CBRE in Asia-Pacific.
"CBRE expects demand for space allocated to unscheduled catch-ups and communal space to increase. As a result of hybrid working, companies will consider reducing the number of large meeting rooms as employees do individual work and conduct small project team meetings more frequently.
"At the same time, occupiers are likely to have increased expectations of landlords to provide on-demand solutions and services for large meetings and events."
INVESTORS RECALIBRATE
CBRE believes the findings have far-reaching implications for real estate investors, many of whom are closely monitoring the recovery in office demand and seeking to recalibrate their investment strategies to capitalise on trends identified in the survey.
"Quality office assets in Asia-Pacific currently present an attractive counter-cyclical opportunity for investors," said Henry Chin, head of research in Asia Pacific for CBRE.
"They should take note of the strong occupier intentions to expand over the medium term, particularly among Asian companies.
"Assets with a good tenant profile catering to market segments benefitting from growth, such as the technology, media and telecommunications sector and Asia-based companies, are well-placed to outperform. These should be prioritised, as those properties are likely to attract stronger flight-to-quality demand."
CBRE also advises investors to track growing occupier demand for assets offering wellness, technology and flexibility, and consider a service offering featuring flexible offices and meeting space on demand, added Dr Chin.
To download the 2021 Asia Pacific Future of Office Survey report, visit https://bit.ly/3kLCasH