Strong Leasing Activity Across APAC Signals Potential Growth for 2025

November 8, 2024 – Bangalore: The Asia-Pacific office market is seeing renewed strength, with office demand climbing by 10.7% year-on-year in Q3 2024, fueled by a ‘flight to quality’ among occupiers, according to a new report by Colliers. The data reveals that demand across the region’s top 11 markets reached 2.2 million square meters (23.7 million square feet), with leasing activity surging in countries like India, New Zealand, and Singapore, each experiencing over 30% growth in annual leasing.

India Leads APAC Office Demand, Accounting for Over 70% of Regional Activity

India has emerged as a powerhouse in the APAC office leasing landscape, driving more than 70% of the total demand in Q3 2024. With approximately 1.61 million sqm (17.3 million sq ft) of leased space, India dominated the market, followed distantly by China, which accounted for 17% of the regional demand. Within India, Bengaluru and Hyderabad were the primary cities fueling the uptake, collectively absorbing over half of the new Grade A office space.

In response to this strong demand, India’s new supply also saw an increase, with 1.34 million sqm (14.4 million sq ft) of office space completed in Q3 2024, which helped keep vacancy rates stable at around 17%. This sustained demand has led to rental growth in major Indian office markets, with rates rising by as much as 10% annually. The Indian office market is now entering an expansionary phase, with expectations of further rental firming in the coming quarters.

“Driven by robust demand and strong occupier interest in premium spaces, major Indian office markets are in a growth phase, with rents expected to rise further. India’s rental property cycle now aligns closely with select APAC markets like Australia, Japan, and New Zealand,” commented Arpit Mehrotra, Managing Director, Office Services, Colliers India.

Shift Towards ESG-Aligned and Premium Workspaces Gains Momentum

The Colliers report highlights a growing trend across the Asia-Pacific office markets: occupiers are increasingly prioritizing high-quality, environmentally certified spaces. This ‘flight to quality’ is evident in India, where corporate tenants are favoring spaces with best-in-class amenities and sustainable certifications. In response, developers are upgrading existing properties and incorporating eco-friendly features into new developments to meet this demand.

“With a positive economic outlook for most APAC nations, the office markets are expected to stay resilient, with an increased focus on premium and ESG-compliant workspaces. This trend is particularly pronounced in India, where we anticipate 5-6 million sqm (54-64 million sq ft) of Grade A office uptake in 2024,” said Vimal Nadar, Senior Director & Head of Research, Colliers India. “This momentum reinforces India’s position as a leader in APAC’s commercial real estate sector.”

Outlook for APAC Office Markets in 2025

As the Asia-Pacific region moves toward 2025, growth in office demand is expected to continue, propelled by occupiers’ focus on enhancing productivity, sustainability, and adaptability. Significant project completions in key APAC markets could drive substantial supply growth in the coming quarters. This evolving landscape may stabilize rental rates, as demand and supply dynamics align despite uncertainties in certain regions.

“The APAC office market is set for further expansion in 2025, with an increased emphasis on creating adaptable, sustainable, and productivity-focused workspaces,” stated Mike Davis, Managing Director of Occupier Services at Colliers APAC. “This evolving view of workspaces will continue to shape the market as companies prioritize flexible, high-quality environments for their teams.”