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PETALING JAYA (June 11): Artificial intelligence (AI) is set to drive stronger economic growth and higher demand for commercial real estate across Asia Pacific (Apac), rather than reduce the need for physical space, according to a new study by global property services firm Cushman & Wakefield.
In a scenario-based analysis titled AI Impact: Regional Insights — Asia Pacific, the firm projects that AI will act as a net positive for both economic expansion and space demand as the region deepens its role as a global hub for production, services and innovation.
“There is a misconception that AI will reduce the need for physical space. Our analysis shows the opposite — AI expands economic activity and that ultimately drives greater demand for real estate across sectors,” said Cushman & Wakefield head of international research, Apac & EMEA, Dr Dominic Brown.
Four AI scenarios, one baseline case
The study models four potential paths for AI adoption, productivity and labour-market outcomes over the next decade:
Baseline — gradual adoption (50% probability)
Moderate productivity gains support steady economic expansion. Space demand holds up overall — with some near-term softness in select sectors — as AI is absorbed as an additive technology over time.
Productivity-led expansion (15%)
Rapid adoption, strong productivity and job creation. This scenario produces broad-based demand growth across sectors, supporting rental growth and rising asset values.
AI bust — moderate recession (25%)
AI falls short of expectations and coincides with a cyclical downturn. Near-term demand weakens, vacancies rise and rents come under pressure before a subsequent recovery.
Dystopic/displacement (5%)
AI proves more labour-substituting than anticipated, leading to higher unemployment. Demand stays weak for longer, with sustained downside pressure on rents and values.
Under the baseline, Apac GDP is projected to grow at roughly 3%–4% annually through 2030, supported by AI-driven productivity and continued investment in infrastructure such as data centres and power. AI is expected to help offset demographic headwinds in some mature markets while lifting productivity in emerging economies.
While AI will automate certain routine tasks, overall employment in Apac is still expected to rise, with a projected net increase of about 58.5 million jobs between 2026 and 2030 in the baseline case. Job growth is seen shifting toward higher-value, knowledge-based work as economies mature.
Office: Flight to quality accelerates
For office real estate, Cushman & Wakefield expects AI to transform, rather than disrupt, the market.
Prime net absorption of office space across Apac is projected to reach 1.035 billion sq ft over the next decade under the baseline scenario. Demand is expected to increasingly concentrate in high-quality, flexible buildings in prime locations, particularly in talent-rich cities and collaboration-led environments.
The report suggests that the existing “flight to quality” — with occupiers upgrading to better-specified, amenity-rich and sustainable buildings — will accelerate, widening the performance gap between premium and lower-grade stock.
Logistics and data centres in the spotlight
The logistics and industrial segment is identified as a key beneficiary of AI adoption, underpinned by:
*automation,
*e-commerce growth, and
*more complex, data-intensive supply chains.
Prime net absorption in the logistics/industrial sector is forecast to reach 2.542 billion sq ft by 2030 under the baseline scenario.
Within that, data centres are highlighted as critical infrastructure. The study notes that power availability will increasingly shape data-centre supply and capital allocation decisions, given the power-intensive nature of AI workloads.
Cushman & Wakefield expects emerging asset classes such as data centres to become more central components of institutional real estate portfolios as AI adoption deepens.
Retail: Winners at the top and bottom
On the retail side, stronger income growth is expected to support overall spending, but the sector is likely to become more polarised:
*High-end and value/discount formats are expected to outperform.
*Mid-market retail is seen facing structural pressures, reflecting a more polarised consumer landscape.
This implies a sharper distinction between destination, experience-driven assets and more commoditised, mid-tier offerings.
Returns outlook and risks
Across core real estate, the study projects total returns in Apac to stabilise at around 10% under the baseline scenario, supported by regional growth and evolving demand drivers.
However, Cushman & Wakefield flags downside risks. A weaker-than-expected AI productivity dividend or more disruptive labour-market effects could translate into:
*higher vacancy rates, and
*downward pressure on rents and capital values over a more extended period.
“While the base case is constructive, the range of outcomes remains wide. Understanding the different scenarios is critical for both occupiers and investors as they plan for the next decade,” Dr Brown said.
Study framework
The analysis forms part of Cushman & Wakefield’s global, multi-sector assessment AI Impact on Commercial Real Estate: The Next 10 Years. It uses econometric models and a scenario-based framework integrated into the firm’s internal “house view” forecasts.
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