In Colliers International's Asia Market Outlook 2019 Annual Report Andrew Haskins, Colliers’ Executive Director of Research in Asia, outlines the key market trends and sector forecasts based on macroeconomic data and geopolitical factors.

At a glance:

• Asian markets set to slow, particularly China, Hong Kong and Singapore
• US-China trade tensions and emerging signs of US slowdown to weigh on Asia
• Office rents to diverge in Asia: Singapore expecting 8% growth; Bangalore and Tokyo also positive; Hong Kong, Shanghai, Beijing neutral to negative; Shenzhen 4% fall
• Logistics strong: China in particular to see further expansion in sector driven by growing e-commerce demand
• Investment market set to dip 5% but opportunities remain, especially Singapore, Tokyo and Bangalore office assets, China logistics assets, and business park assets
• Singapore will stay one of Asia’s top occupier locations despite rising rent

Andrew Haskins, commented: “Slower growth in China and emerging signs of a slowdown in the U.S. cloud the outlook for Asian property. However, interest rates ought to rise more gradually than previously expected, holding funding costs down for developers and investors.”

Asian Markets Set to Slow

Mr. Haskins added: “Chinese real GDP growth will slosw towards 6.0% in 2019, while Hong Kong and Singapore will also see lower growth in 2019 than in 2018. Japan and South Korea look more stable, while growth in India has rebounded sharply. Trade disputes remain a key concern, and signs that a slowdown is starting to take hold in the US may weigh on Asia. More positively, a probable slower pace of interest rate increases than previously expected should help hold down cost of funds for investors and property developers in most Asian markets.”

Office Sector: Rents Diverging

Demand from the technology and flexible workspace sectors is firm, but turbulent markets and trade tensions cloud prospects for finance and manufacturing groups. Supply of space should also jump in China, notably in the South. Office rents should therefore diverge in 2019. We expect average rent to rise 8% in Singapore and 4–5% in Bangalore, and more modestly in Tokyo, but to be flat or fall in Hong Kong, Shanghai, Beijing and Shenzhen.

Logistics & Industrial Sector to Expand Further

Logistics should see further strong expansion in 2019. In China, firm growth in e-commerce is driving demand for warehouse space, and low vacancy is pushing tenants into Tier 2 cities. South Korea sees similar positive trends. While growth in Hong Kong is more modest, investors are eyeing industrial assets for conversion potential. The granting of infrastructure status to the logistics sector in India heralds sharp expansion, and higher interest from developers and investors.

Retail Market Stabilising, But Challenges Remain

Conditions in retail property are uncertain. Besides the threat from e-commerce, we see ample new supply of retail space in several cities. Rent growth is mildly positive or mildly negative in Shanghai, Beijing, Singapore and Hong Kong. However, landlords and tenants alike face the long-run challenge of putting experience, entertainment and digital connection at the heart of their retail offering.

Investment Market to Slow, But Opportunities Remain

Transactions of investment properties totalled USD126 billion in 2017, an all-time high. We assume that transactions slipped 2% to USD122 billion in 2018 and expect a 5% dip to USD117 billion in 2019, mainly due to lower activity in Hong Kong. Demand is firm, and we still see appealing investment opportunities in Asia, especially office assets in Singapore, Tokyo and Bangalore, logistics assets in China (especially Tier 2 cities, where buildings are available) and other markets, and business and industrial park assets.

For more information or to discuss the Asia Market Outlook 2019 Annual Report e mail Andrew Haskins, Colliers’ Executive Director of Research in Asia via the contact details below.

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