COVID-19 has exerted a profound impact on the Asia Pacific office market in 2020, concludes CBRE in its June-2020 report.
This ViewPoint by CBRE explains how the flexible space sector in Asia Pacific has been impacted by the pandemic thus far; examines how operators have responded; discusses how the occupier view towards agility is evolving; and identifies strategies for landlords seeking to manage their exposure.
One of the most visible impacts of the COVID-19 outbreak has been an immediate drop in occupancy levels at coworking centres and serviced offices as well as a slowdown in membership growth – especially from start-ups and smaller enterprises – as potential users
suspend inspections and trim operational expenditure to cut costs.
Flexible space – which includes both coworking centres and serviced offices – has not been spared the effects of the pandemic. Attendance has been affected as lockdowns and social distancing force members to work from home; numerous operators have shortened operating hours or closed facilities temporarily; and growth in new memberships has been delayed as potential users suspend inspections and trim operational expenditure for immediate cost saving.
More merger and acquisition activity among operators is expected. Closures of unprofitable centres will be unavoidable but surrendered or subleased space is likely to be taken up by other coworking operators that are financially sound, or by tenants seeking fully fitted-out space.
Although the COVID-19 pandemic will put the brakes on aggressive operator growth and usher in a phase of consolidation in what is an already crowded marketplace, the flexible space market remains resilient.
According to CBRE, the long-term drivers of flexible space demand are intact, with smaller users continuing to seek cost effective fully furnished space and large multinationals looking to build more agility into their office portfolio.
However, there will inevitably be some failures among operators, writes CBRE.