Knight Frank launches Asia Pacific Office Occupier Survey 2015

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Knight Frank, the independent global property consultancy, today releases its 2015 Asia Pacific Office Occupier Surveyundertaken by more than 270 companies located in Asia Pacific spanning across eight industries including:

  • Consulting
  • Consumer products
  • Finance / Accounting / Legal
  • Manufacturing / Agriculture
  • Pharmaceutical / Biotechnology /Healthcare
  • Petroleum / Energy
  • Public sector / NGOs
  • Technology & Communication

Mr. Ross Criddle, Head of Global Corporate Services, Knight Frank Asia Pacific, says, “This is our second run of the Office Occupier Survey and again the results provide an invaluable insight into how occupiers use and plan their office space in Asia Pacific. Consistent with our findings last year, rent remains as the most important consideration. We are, however, certainly witnessing a shift to a more flexible work environment – most notably in Australia and South East Asia.

“Our findings also support the principle that Asia Pacific continues to be a growth market, with over 60% of respondents foreseeing that their headcount will grow over the next 12 months – a positive sign for the region.”

On lease renewal, Mr. Marcus Burtenshaw, Executive Director and Head of Commercial, Knight Frank Thailand, highlights, “Each year, the Occupier Survey has many interesting findings. The one thing that consistently stands out is the number of firms that continue to leave it to the last six months before thinking about what to do at their next lease expiry. Six months does not provide enough time to properly weigh your alternatives, and to put contingency plans into action. This could potentially lead to occupiers facing no alternative but to accept the landlord’s proposed terms, whatever they might be.

“We recommend tenants to start this process at least a year in advance of lease expiry. This provides more time for market investigations, conduct renewal negotiations and, if necessary, to still provide time to fit-out and relocate to new premises. Bear in mind though that tenants occupying multiple floors or in markets with limited options should start this process even sooner.”

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Highlights of survey results

Ranking office building attributes

  • All respondents from the public sector/NGOs regard rent as the most important factor out of the nine office building attributes surveyed. They also value image the least among all industries.
  • Technology & communication firms value amenities more than image, as reflected in their taste for campus-style business space. They also prefer locating close to their employees to being near mass transit.
  • While rent is the primary consideration in general, local factors may be more important in some countries.

o Frequent traffic congestion leads Thailand to place greater value on proximity to mass transit than any other countries.

o Security comes in top for businesses in Taiwan.

o Green credentials are placed at the bottom of the list of priorities across the region, except in Malaysia.

 

Mr. Teh Young Khean, Executive Director of Commercial Agency, Knight Frank Malaysia, says, “Many MNCs here in Malaysia recognise that an energy-saving building can produce cost savings to their operation over the long run.”

Office building satisfaction

  • Satisfaction level is highest in places with the highest rents i.e. Hong Kong and Singapore.
  • The energy and finance/accounting/legal industries are the most satisfied with their office space, whilst the public sector/NGOs are the least satisfied.
  • 30% of all the respondents expressed that their current building is a perfect fit for their business. In contrast, only about 5% of all the respondents are highly unsatisfied with their current building.

 

Lease renewal preparation

  • Most of the respondents start preparing six months ahead of a lease expiry – this forms 42% of all the respondents. The next popular timeframe is 12 months ahead, practised by 35% of the respondents.
  • Only 9% of all the respondents start preparation 24 months before lease expiry.
  • Australia begins the earliest, at 17 months before lease expiry.

 

Ms. Joanna Gordon, National Director for Global Corporate Services, Knight Frank Australia, explains, “In Australia, early-stage planning for lease expiry is driven by two factors: firstly, long lead times on procurement of furniture to this region; secondly, a sophisticated Tenant Advisory service, integrating Project Management and Tenant Representation, which often yields the best results for corporate occupiers.”

 

Space and labour acquisition

  • Across the board,

o Space

  • 38% of all the respondents acquired additional space in the last 12 months; whilst only 9% returned surplus space – these were primarily in the energy and consumer products sectors.
  • 53% of all the respondents kept the same amount of space.
  • The manufacturing and pharmaceutical industries showed the greatest expansion at 52% and 50% respectively.

o Labour

  • 60% of all the respondents expect to increase headcount over the next 12 months; whilst 6% expect the headcount to fall.
  • 34% of all the respondents expect the headcount to stay the same.
  • As a result of the fall in energy prices last year, only 23% of energy firms expect to grow headcount over the next 12 months.

 

  • India: the bright spot in the region

o 58% of the Indian respondents expressed they had acquired additional space in the last 12 months.

o 79% of the Indian respondents expect to increase headcount over the next 12 months.

o The promise of reform had generated a groundswell of optimism in India, registering the highest demand for both office space and labour in the region. These results also marked significant improvements from the 2014 survey results.

 

Cost-saving initiatives

 

Cost-saving initiatives considered or implemented

% responses (all respondents)
Split operations 17%
Secondary location 20%
Standardised desk allocation 21%
Flexible working 25%
Reduced area per person 27%
None of the above 34%
  • “None of the above” was the most popular option selected by all respondents in terms of cost-saving initiatives to reduce their rental burden. This is especially reflected in finance/accounting/legal, consumer products,and technology & communication industries.
  • In contrast, the consulting businesses seem to have adopted the most methods to reduce costs with 15% of the respondents in this industry selecting “None of the above”.
  • Despite paying the highest rents in the region, Hong Kong appears to be doing relatively little to save costs with 54% of the respondents from Hong Kong selecting the option “None of the above”.

 

Mr Nelson Lam, Director of Commercial Agency, Knight Frank Hong Kong, explains, “The high costs of fit-out in Hong Kong, approximately US$100 psf, make it difficult to create sufficient improvements in efficiency through workspace planning to offset them. Hence, most firms will first choose to relocate or split operations, but even that is challenging given the current vacancy rate in Central Hong Kong of under 3%.”

 

  • Flexible work programme has a strong following in Australia where 82% of the Australian respondents adopt the practice.
  • Unexpectedly, none of the respondents from Hong Kong implement flexible work programme, despite the significant presence of multi-national corporations in the global city.
  • Most of the firms adopting flexible work arrangement are in typically innovative industries such as consulting, pharmaceutical and technology & communication fields.
  • Of those that do accept flexible working practices, most allow their staff to work from home or in multiple locations.

 

 

 

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