In particular, demand is likely to slow in the major financial centres such as Hong Kong and Singapore, due to some contraction in the banking and financial sector, although centres such as Shanghai, Tokyo and Sydney have been less affected so far. Moreover, few expect downsizing in the banking and financial sector to the same degree as following the collapse of Lehman Brothers in 2008.
On the other hand, various other sectors should continue to see solid take-up of space in 2012. These include:
Offshoring & outsourcing: growth is likely to continue in the offshoring and outsourcing (O&O) industry as MNCs look to reduce costs. O&O revenue in the Philippines is forecast to grow by 15% per year from 2010 to 2016. India is also an attractive location given its large educated labour supply and cheap/stable rents.
IT/ITES: India’s information technology (IT) and IT-enabled services (ITES) sector should grow by 11-14% in the 2012-2013 fiscal year, according to Industry body Nasscom. The industry currently employs close to 2.8 million people currently and accounts for roughly half the demand for grade A office space in India.
Pharmaceuticals: pharmaceutical companies are growing strongly in China, India and Japan. In Shanghai, for example, foreign pharmaceutical companies are expanding not only in downtown Grade A office for front offices, but also in business parks for R&D and back offices. Pharmaceutical companies are also expanding and upgrading from lower grade buildings in Tier II cities in the Yangtze River delta (e.g., Hangzhou and Nanjing).
Retail: strong take-up of office and other space is expected in China in particular, due to aggressive expansion of foreign retailers. Many international retailers plan to at least triple their stores in China over the next 2-3 years.
Resources: the resources industry should continue to drive leasing demand in cities such as Jakarta, Kuala Lumpur and Perth.
As a result of these strong drivers, we expect overall activity levels in the office leasing market to remain relatively resilient across the region this year despite global economic headwinds.
About the author
Myles Huang is a Local Director, Asia Pacific Research for Jones Lang LaSalle, based in Hong Kong.