The report suggests that due to economic headwinds, cost control and budget consciousness will continue to be key priorities for corporate occupiers. This is expected to drive companies to renew leases, concentrate on cost-effective space options, and give emphasis to workplace optimisation as a strategic measure, says Ada Choi, Head of Occupier Research and Head of Data Intelligence and Management for Asia Pacific at CBRE.
                                                              
While office availability in Singapore, South Korea and Japan will remain tight, mainland China, Hong Kong, as well as India and Thailand, will offer ample supply.

"The new office supply in Asia Pacific for this year is equivalent to the total office stock of that of Singapore. This increase in supply offers corporate occupiers more options to consider when moving, such as a more desirable location with better amenities and potential cost savings," says Choi.

Moreover, many companies are implementing workplace transformation solutions to enhance collaboration, optimise space, and incorporate sustainability features in efforts to improve productivity, well-being, and ESG compliance, adds Choi.

In the pursuit of quality tenants, property developers and landlords alike are advised to compete not only on pricing but also on features such as transport accessibility, green building elements, and the availability of convenient amenities like restaurants and cafes nearby.

Investment activity to pick up in the second half of 2024

“However, a revival in the second half of 2024 is expected on the back of anticipated asset re-pricing and interest rate cuts,” says Dr Chin. 

Much of the buying activity will be driven by high-net-worth individuals, cash-rich investors, and corporations eyeing prime assets. As a result, CBRE forecasts full-year investment volumes to recover by 5% to 10% this year.

Investors are expected to focus on value-add opportunities for their high internal rate of return, as well as core assets in tier 1 markets due to their ability to provide stable cash flow. Tight funding conditions means that private credit investment is also likely to attract interest from investors.

The industrial & logistics and office sectors remain most preferred sectors for investment in 2024, although the living sector – including build-to-rent (BTR) and build-to-sell – is expected to attract more capital.

According to Dr Chin, BTR projects are emerging as an attractive asset class for institutional investors, with Japan leading a mature BTR market and rising interest in Australia and mainland China. Smaller developments in Hong Kong and Singapore are also gaining attention.

Recovery in mainland China to boost real estate investment activity

Meanwhile, the future growth of mainland China will undoubtedly have an impact on the commercial real estate industry in the region. While the pace of economic growth in mainland China is normalising, the coming months are likely to see the launch of supportive measures to stimulate growth. Some of this is evidenced in China's recent "Two Sessions" conference, where a 5% economic growth target was set for 2024. There was a noticeable uptick in investment activity for the first two months of 2024 in mainland China, although investors were largely domestic players.
 
China's policy efforts to drive economic growth are critical to the region's real estate investment activity if sustained, says Dr Chin.

“A stronger recovery, if sustained, would provide an added boost, given China's status as the world's second-largest economy and a key trading partner for many countries in this region,” he says.

Read CBRE’s 2024 Asia Pacific Real Estate Market Outlook for more forecasts and insights on the region’s real estate industry.