SINGAPORE (EDGEPROP) - An industry report by Colliers International has highlighted that office occupancy in the Asia Pacific region is about 80% on average. This is higher compared to North America and Europe where occupancy levels are about 50% and 65% respectively.

The Colliers’ report states that this difference boils down to varying return-to-office approaches, underlying city functionality, ESG compliance, and market reactions to shifts in inflation and interest rate movements. As a result, this has caused the latest divergence in office investment volumes, pricing and global investment appetite, the consultancy says.

“Even as the office markets globally continue to face short-term challenges, Asia Pacific remains attractive for office investments over the longer term,” says Chris Pilgrim, managing director, global capital markets, Asia Pacific.

He adds: “The strong underlying fundamentals include the diverse range of markets, positive sentiments towards offices from a demand perspective and strong population-led economies presenting more resilient economic growth."

In contrast, the office market in North America faces weak occupier demand. As a result, the average vacancy rate in that region has climbed to 16%. The ability of landlords to offer incentives to support rents continues to be stretched.

However, prime rents for European offices are increasing as demand for higher-quality spaces — especially ESG-compliant spaces — is growing. “We are seeing pressure to repurpose space that doesn’t meet contemporary demands as a growing proportion of buildings face obsolescence,” says Luke Dawson, head of global and EMEA capital markets at Colliers. “This is driving a shift in value-add plays across key markets, especially where high importance is placed on ESG, such as in the UK."