Asian Property Market Feeling Sluggish

Jones Lang LaSalle’s Asia Pacific Property Digest reports that Asia is feeling the effects of a weak global market, although there the prevailing trend is one of growth …

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Jones Lang LaSalle’s Asia Pacific Property Digest reports that Asia is feeling the effects of a weak global market, although there the prevailing trend is one of growth in the region. Japan, China, Hong Kong and Singapore are all showing impressive increases in leasing activity and experts say the gains are expected to continue. The office sector has shown some weakness across the region, but most other markets are making up the difference. Residential leasing is strong as are other areas of the commercial real estate market throughout Asia. For more on this continue reading the following article from Property Wire.

Despite global headwinds and a challenging global economic environment, strong investment volumes in the Asia Pacific property market point to signs of resilience, according to analysts.

However, the latest Asia Pacific Property Digest market report from Jones Lang LaSalle also points out that a slowdown in leasing activity suggests that the region is not completely immune to the current global economic conditions.

It shows that direct commercial real estate investment activity rebounded in the second quarter of 2012 with volumes increasing 26% year on year to US$26 billion. Japan saw the biggest year on year growth at 290% as it recovered from the Tohoku earthquake last March, while Hong Kong, Singapore and China also registered strong double digit growth.

With stronger investment volumes, capital values also grew in most major markets. Jakarta and Beijing CBDs saw the largest quarter on quarter increases at 9% and 11% respectively, while capital values in Shanghai, Tokyo and Sydney exhibited small gains of up to 1.5%.

However, office leasing activity was down about 10% in the second quarter compared  to the same period in 2011, attributable to corporate caution and the flow on effects of ongoing economic uncertainty.

‘The Asia Pacific property markets are holding up relatively well given the global economic backdrop. Leasing activity levels should continue to trend moderately lower than last year’s record levels, while we expect investors will continue to search out opportunities, particularly in prime locations. In turn, we anticipate rents and capital values will continue to grow in most markets, albeit at a slower rate than 2011,’ said Jane Murray, head of research for Asia Pacific at Jones Lang LaSalle.

Jeremy Sheldon, managing director of markets for Asia Pacific explained that while there is some healthy growth forecasts for the Asia Pacific economy, leasing activity has steadied during the course of the year.
‘There has been a decline in the established financial markets, however we are seeing strong demand in key South East Asian markets, and certain cities in China. While this pattern is likely to continue through to the remainder of the year, we are optimistic that leasing will remain largely stable,’ he said.

In the office sector, expansion demand weakened across the region as corporates cut back on their near term expansion requirements. However, there was still a significant amount of relocation and consolidation activity, particularly to decentralised locations offering cost savings.

Aggregate rental growth across the region averaged 1% quarter on quarter, picking up from 0.2% in the first quarter of the year but still below the post global financial crisis average quarterly growth of 1.5%.

Beijing and Jakarta continued to outperform for the fifth consecutive quarter, with quarter on quarter increases of 8 to 9% as a result of low vacancies and limited near term supply. The financial centres of Hong Kong, Singapore and Sydney recorded modest rental declines of about 1%, while Tokyo saw an increase of about 1%, the first increase in four years.

Retail performed well as leasing demand remained strong in Greater China and was relatively healthy in South East Asian markets. Rental rates were similarly positive in China and South East Asia, except for Singapore where prime rents fell marginally. Hong Kong was the regional outperformer with rental growth rates of 3% quarter on quarter and 14% year on year on the back of tight supply.

While residential leasing demand remained generally healthy in China, Jakarta and Manila, high end leasing demand was subdued in Hong Kong and Singapore. Rentals climbed in most markets outside of Hong Kong, Singapore and Bangkok.

This article was republished with permission from Property Wire.

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