APAC Office Tenants Eyeing Flexible Spaces: Knight Frank

Companies are signing short-term leases to avoid long-term commitments, according to the real estate consultancy

Tenants in Asia-Pacific’s commercial real estate market are likely to seek flexible office spaces and sign short-term leases, avoiding long-term commitments while waiting for the full impact of the US-China trade war to play out, according to Knight Frank.

The situation has forced office landlords to focus on retaining their existing customers at the expense of softer rents, the consultancy said. Rents on prime office space, which fell at a faster pace last quarter, may come under further pressure as the firm forecast region-wide supply to increase by 5.7 per cent this year to about 200 million square metres (2.15 billion sq ft).

“As Trump’s tariffs continue to evolve, the full economic impact of the new measures will take time to unfold.”Forward-looking expectations will inevitably turn more cautious as a new modus operandi for the global economy emerges.

Tim Armstrong, Global Head of Occupier Strategy and Solutions at Knight Frank

US President Donald Trump imposed cumulative tariffs of 145 per cent on Chinese goods this month, starting off a trade war with its long-standing trade partners. China, which raised its tariffs on US goods to 125 per cent, now faces up to a 245 per cent levy on its exports to the US. Both sides are waiting on each other to negotiate, causing a stalemate.

“As Trump’s tariffs continue to evolve, the full economic impact of the new measures will take time to unfold,” Tim Armstrong, Global Head of Occupier Strategy and Solutions at Knight Frank, said in a report last week. “Forward-looking expectations will inevitably turn more cautious as a new modus operandi for the global economy emerges.”

As companies in the region reassess the tariffs and their impact on headcounts, Armstrong expects decision makers to delay significant real estate commitments. “This trend is driving a stronger focus on lease renewals, particularly for those who have moved into higher-quality buildings in the past few years and prompting occupiers to explore flexible spaces and shorter lease terms,” he added.

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