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Office leasing activity dips in most major APAC markets in April: Knight Frank

KUALA LUMPUR (April 30): Office leasing activity in most major Asia Pacific markets dropped in April, with many international commercial occupiers are postponing leasing deals as uncertainty around global demand, supply chains and cash flow lead to a delay in decisions, said Knight Frank. 

The global real estate consultancy, in its report “The Knight Frank Asia-Pacific April 2020 Market Bulletin: COVID-19 and its Impact on Real Estate” found that in the first two weeks of April, about 73 per cent of the region’s 15 major office markets recorded a drop in leasing activity.

Manila, Guangzhou, Shenzhen and Hong Kong were the only four markets that registered stable leasing activity, it said.

The sentiment survey, conducted with Knight Frank brokers, also saw 11 out of 15 markets reporting slower leasing activity within their markets since April 1. 

Head of occupier services and commercial agency for Asia Pacific Tim Armstrong said the need to preserve cash and reduce capital expenditure is inevitably putting a hold on corporate real estate decisions  such as strategic relocations or fit-out projects which require significant capital outlay.

“However, we expect occupiers to pause rather than cancel such activities. Already, we are witnessing steady demand from food retailing, telecommunications, online education, and some manufacturing firms in some markets.

“The markets seeing an uptick in activity over the last two weeks are mainland China which is firmly in recovery and South Korea,” he said.

On another note, the report stated that the e-commerce logistics sector continued to be active in Southern China, while Taipei still sees market balances in favour of landlords.

Taiwan office demand continues to outstrip supply, and a flight to quality trend indicates rents can be expected to continue growing.

Although companies have been forced to participate in the world’s largest work-from-home experiment, the demise of the office is an unlikely outcome, said the report.

Commenting on this, Armstrong said a physical office, one that is separate from homes – creates a much-needed barrier between work and home life.

“The current crisis would not eliminate the need for office space but will help us appreciate its social value.

“In fact, the current situation has expedited a trend we have identified in the last few years, namely, the move towards offices as social hubs of creativity and innovation rather than centres for administration,” he added.

To help businesses prepare for a return to work, Knight Frank said it had launched a roadmap to ensure that employees are able to safely re-enter the workplace once lockdown sanctions are lifted, while ensuring the wellness of employees and decreasing the spread of COVID-19.

“The roadmap is designed to support occupiers in five clear areas including understanding their employee base, reviewing the employee/customer journey within the workplace, evaluating social distancing options, determining occupancy impact and developing protocols,” it said.

The roadmap, which helps businesses determine best practice for re-occupying offices, identifies two categories of change that will need to occur in order to safely re-enter the workplace.

This includes behavioural changes which ensure that strict protocols such as clear desk policies are applied, and that social distancing is possible within the workplace, while the second is environmental changes including increased air flow, changing heating, ventilation, and air-conditioning (HVAC) filters or enhancing cleaning regimes.

“We will need to adapt to a new normal, at least for the foreseeable future, which combines both the importance of collaboration, social interactions, and conducting business, while mitigating fear and protecting the workforce,” Knight Frank added.

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