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 the latest analysis of the market by Jones Lang LaSalle in their Q2 2012 Asia Pacific Property Digest APPD). However, a slowdown in leasing activity points suggests that the region is not completely immune.
Direct commercial real estate investment activity rebounded in Q2 with volumes increasing 26% yo-y to US$26 billion. Japan saw the biggest y-o-y growth (290%) as it recovered from the ohoku 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 q-o-q increases (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 Q2 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 Dr Jane Murray, Head of Research Asia Pacific at Jones Lang LaSalle.
“While we are seeing 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,” said Jeremy Sheldon, Managing Director, Markets Asia Pacific Jones Lang LaSalle.
Todd Lauchlan, Country Head Jones Lang LaSalle Indonesia further elaborated that demand across all sectors in Jakarta continued to remain strong. Take-up in the office sector surged to around 28,000 sqm, nearly double that of 1Q12 driven by rapid corporate expansion in the country. “Strong corporate growth also provided a boost in the luxury apartment market in Jakarta as evidenced by steady rental growth,” Lauchlan added.
Specifically, sector highlights include:
• 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% q-o-q, picking up from 0.2% in Q1, but still below the post-GFC average quarterly growth of 1.5%. Beijing and Jakarta continued to outperform for the fifth consecutive quarter, with q-o-q 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. Further highlights are covered in the latest Jones Lang LaSalle Asia Pacific Office Index.
• Retail performed well in Q2 as leasing demand remained strong in Greater China and was elatively 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% q-o-q and 14% y-o-y 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.
• Industrial demand was buoyed by retail sales in Q2 2012, particularly in China, however rents remained stable across most monitored markets. With the slowdown in global trade, the exports/imports segment remained subdued.
By: Jones Lang LaSale Asia Pacific
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