The RTO That Never Came: But What Will 2025 Bring?

In the wake of the COVID-19 pandemic, businesses worldwide braced for a return to normal, expecting employees to head back to the office by 2021.

This “Return to Office” (RTO) was anticipated to bring demand for office spaces back to pre-pandemic levels. However, the reality in Asia and beyond has been quite different. Instead of the anticipated recovery, hybrid work and work-from-home (WFH) policies have taken root, reshaping the commercial real estate (CRE) landscape in ways few predicted.

As we approach 2025, flexible work models, changing employee preferences, and the rise of flexible office operators have fundamentally transformed the region’s office markets.

The Expectation in 2021

In Asia, the expectation for a full RTO was particularly strong. Cities like Singapore, Hong Kong, and Tokyo, known for their dense urban centres and prominent financial sectors, were expected to lead the charge back to normalcy.

CRE and construction firms in these cities prepared for a surge in office leasing, anticipating that once the pandemic subsided, businesses would require renewed office space to accommodate their workforce. New projects were planned and existing spaces renovated, all in anticipation of a strong rebound.

In rapidly growing markets like India and Southeast Asia, where the office market was already booming before the pandemic, the expectation was that office-based work would return in full force. Construction pipelines remained active, and in some cases companies even signed leases for new office spaces as a hedge against future growth.

The Reality: Hybrid Work Takes Root

By late 2021, it became clear that the traditional RTO wasn’t happening at the scale the CRE industry had anticipated. Instead, hybrid work became the dominant model for many businesses, driven by employees who had grown accustomed to the flexibility and improved work-life balance that WFH arrangements provided.

In major Asian cities like Singapore and Hong Kong, and even the fast-growing tech hubs of India such as Bangalore and Hyderabad, businesses started rethinking their office space needs. Vacancy rates in office towers remained high, and companies reduced their physical footprints, opting for flexible office arrangements instead of long-term, large-scale leases.

In China, the resurgence of COVID lockdowns in 2022 further solidified hybrid work as a permanent fixture, stalling office recovery in cities like Beijing and Shanghai.

The Role of Flexible Office Operators

As hybrid work models became the norm, flexible office operators have emerged as key players in the office landscape across Asia. Companies no longer need vast, fixed office spaces but instead require flexible solutions that allow them to scale up or down based on current workforce needs. This has led to a significant increase in demand for coworking spaces, serviced offices, and short-term leasing options.

1. • Rise of Coworking Spaces
     Global operators, and local players like The Executive Centre have rapidly expanded in cities across Asia. Businesses are attracted to the flexibility these operators offer, including the ability to rent desks or office suites by the day, week, or month. For companies unsure of how hybrid work will evolve, coworking spaces offer a low-risk, scalable option. In cities such as Singapore and Hong Kong, where commercial office rents are high, flexible office operators have become a viable solution for both large corporations and smaller start-ups. The ability to lease small spaces on-demand, without committing to long-term leases, has been particularly appealing to tech firms and creative industries.

1. • Corporate Adoption of Flex Spaces
     Large multinational corporations (MNCs) in Asia have increasingly adopted a hub-and-spoke office model, where central offices in prime locations are complemented by satellite offices in suburban areas or coworking spaces closer to where employees live. This reduces the need for long commutes while maintaining a physical presence in prestigious business districts. In India, for instance, flexible office operators have rapidly expanded their presence in tier-2 and tier-3 cities as large firms seek to offer employees more options for hybrid work. Similarly, in Southeast Asia, companies have embraced coworking spaces as cost-effective and scalable solutions.

1. • From Permanent Leases to On-Demand Workspaces
     As the demand for traditional office space declines, flexible office operators are capitalising on businesses’ desire for adaptable workspaces. Start-ups and SMEs (small and medium-sized enterprises), in particular, are turning to coworking spaces to meet their needs for agile, tech-enabled work environments. Operators such as JustCo, which is based in Singapore, and other regional players are now positioning themselves as strategic partners to businesses, offering not just space but also services like IT support, HR resources, and access to a global network of offices. The model is evolving into a service-based one, where flexibility and additional amenities are key differentiators.

Impact on Commercial Real Estate in Asia

As flexible office operators rise in prominence, the traditional CRE industry across Asia is being forced to adapt. This shift is especially significant in cities like Hong Kong, which historically had some of the highest commercial rents in the world. Here are some key impacts:

1. • Decreased Demand for Large-Scale Office Leases
     Many businesses are reducing the size of their leased office spaces. In Singapore and Hong Kong, companies have been surrendering office floors or renegotiating leases to reflect their smaller space needs. Similarly, in India, traditional office space demand has softened in metro cities like Mumbai and Delhi as businesses embrace hybrid models and adopt a wait-and-see approach on future space requirements.

1. • Refurbishing Existing Spaces
     With fewer businesses opting for long-term leases, there has been a noticeable shift towards refurbishing existing office buildings. Property owners are reconfiguring layouts to support flexible work environments and introducing more amenities, such as wellness spaces, touchless technology, and collaboration hubs, to make the office more attractive in a hybrid work setting. In cities like Tokyo and Seoul, there is growing investment in creating ‘smart buildings’—spaces equipped with cutting-edge technology that supports hybrid working, improves energy efficiency, and enhances employee well-being.

1. • Sustainability Gains
     The shift to hybrid work has also had environmental benefits. With fewer employees commuting daily and less demand for large office spaces, businesses are reducing their carbon footprints. In cities such as Singapore, there has been a growing emphasis on green building certifications such as BCA Green Mark, with companies prioritising sustainability as part of their office strategies. Flexible office spaces, by design, optimise resource use. Shared amenities, shorter lease durations, and multi-tenant buildings reduce waste and lower energy consumption, making these spaces more environmentally friendly compared to traditional office setups.

Looking Ahead to 2025: What Can We Expect?

As we approach 2025, the anticipated RTO in Asia will likely remain elusive. Here’s what we can expect going forward:

1. • Flexible Office Operators Will Lead the Market
     The rise of coworking and serviced office providers will continue, with major players expanding their footprint across Asia. Companies, large and small, will increasingly rely on these operators to provide flexible, scalable workspace solutions. In markets like Singapore, Hong Kong, and Tokyo, where high office rents have long been a concern, flexible office operators will play a larger role in the real estate ecosystem.

1. • Hybrid Work Will Solidify as the Norm
     The hybrid work model is here to stay. Most companies in Asia will adopt a mix of remote and in-office work, maintaining smaller, centralised hubs for collaboration and using flexible offices to offer more regional or localised options. This will also drive demand for technological infrastructure that supports seamless communication between in-office and remote teams.

1. • A New Approach to Office Design
     Office design will continue to evolve, with a focus on creating adaptable, tech-enabled spaces that facilitate collaboration and innovation. Offices will be smaller but smarter, with an emphasis on employee experience, wellness, and sustainability.

1. • Consolidation in the CRE Sector
     The CRE sector is likely to see further consolidation, especially among smaller office landlords. The winners will be those who can pivot to accommodate the changing demands of hybrid work and partner with flexible office operators to provide a new generation of office solutions.

The RTO that never came has reshaped the commercial real estate landscape in Asia. As businesses continue to embrace hybrid work models, flexible office operators are playing an increasingly vital role, offering the agility and services that companies now prioritise.

With 2025 on the horizon, the future of work in Asia is defined by flexibility, collaboration, and technology—a far cry from the traditional office-centric models many expected would return.