- As the global pandemic persists, the investment-grade office market has been gradually softening but fundamentals appear sound.
- Although regional markets have thus far benefited from supply being stubbornly limited, as vacancy rates inch up, landlords are likely to become more flexible and consider offering some incentives.
- If increases in vacancy materialise late this year in response to a jump in supply, rents in regional cities may feel further downward pressure.
Fundamentals remain strong despite the gathering of clouds
(7).jpg "High-grade Office Performance, 1H/2020")
GRAPH 1 | Investment-grade Office Performance, 2H/2020
Whist market fundamentals are still sound, the impact of COVID-19 is being felt. Accorodingly, vacancy rates have loosened and rental growth momentum is losing steam. If the downturn is prolonged and large potential vacancy materialises late this year as new supply comes online, the direction of the markets may change abruptly.
Savills Research & Consultancy