31 January 2013

The Asia real estate market is set to advance in 2013 as average rent and price in the office, residential, retail and industrial sectors continue to have an up stick with 2-5% growth predicted in 2013, albeit at a milder rate when comparing with the range of 5-9% in 2012, according to the findings of the Asia Real Estate Forecast 2013 released today by Colliers International.


In terms of investment yield, it will continue to see a falling trend in 2013 but the degree of compression will be much slower between flat and 10 basis points. Simon Lo, Executive Director of Research & Advisory, Asia at Colliers International said, “Occupiers are expected to take advantage of the prevailing low interest rate environment to acquire real estate for long-term occupation rather than leasing. Meanwhile, with more support by most banks and other lending institutions on real estate financing, investors, who were constrained by limited loan-to-value ratios previously, are anticipated to take on more risks to commit purchases.”


Hong Kong

2013 Real Estate Forecast – Hong Kong

 

2012

2013

(% growth YoY)

Rents

Capital Values

Rents

Capital Values

Office 1

-3%

7%

5%

9%

Residential 2

-5%

3%

-5%

-10%

Retail 3

14%

27%

9%

11%

Industrial 4

6%

20%

5%

10%

1 Office refers to Grade-A office

2 Residential refers to high-end units located in traditional luxury locations

3 Retail refers to ground-floor shops in traditional shopping locations

4 Industrial refers to factory and warehouses

 

In 2013, the average rent and price of Hong Kong’s Grade A office, retail and industrial properties are predicted to grow further while the luxury residential sector is expected to experience a downtrend.

Hong Kong’s Grade A office rental increase will be supported by the steady growing occupational demand in the legal sector and the continued support from mainland companies. In anticipation of rental stabilisation in the traditional CBD areas, office sales prices in the core areas are expected to pick up in 2013 after strong buying interests were recorded in office developments in decentralised areas in the previous year.

In view of Hong Kong’s retail sales seeing a steady rather than vigorous growth recently, retailers have become more realistic to make their offer on leases. Thus, the local retail rental growth will likely taper off from 14% in 2012 to 9% in 2013. Meanwhile, the average industrial price growth is projected to slow to 10% in 2013 after the distinct yield compression in 2012.

However, as cooling measures by the local government have been in place in the residential sector, sales volume contracted immediately in 4Q 2012. Looking ahead, both luxury residential prices and rents are projected to come under downward pressure in 2013.


Office Sector in Asia
Amid the current supply cycle of the Asia office sector, individual occupiers see opportunities to relocate and upgrade their offices to buildings of better quality; however, it also creates downward pressure on the average rent over the short term. For example, office rents are predicted to edge down in markets such as India, Singapore and Vietnam.

In terms of office rental growth forecast in 2013, Jakarta, benefiting from the buoyant leasing demand from overseas companies engaged in banking and finance, leads in Asia with a rental projection of 35% increase. Following Jakarta, Beijing, seeing office relocation and expansion needs by many domestic firms and MNCs, takes the second spot with the expected rental growth of 11% in 2013, while Bangkok with the lack of new supply in the CBD comes in third in Asia with the average office rents anticipated to rise 10% in the year.

Residential Sector in Asia
In most Asian markets in 2012, residential prices registered buoyant performance, ranging from flat growth to over 26% upsurge. In order to stop the residential sector from developing into an asset bubble, the government in Singapore and Hong Kong has introduced buying and lending restrictions in an attempt to cool down local residential prices.

Nevertheless, the residential sector in most Asian cities are expected to hold its fort, thanks to the genuine demand from the growing number of local residents due to on-going increase in natural birth rates and migration of residents into urban centres. The average residential price in Beijing, NCR (Delhi, NOIDA and Gurgaon) in India and Jakarta are projected to rise 17%, 12% and 11%, respectively, and are the top three Asian outperforming markets in 2013. Meanwhile, Hanoi, Singapore and Hong Kong are the only three markets anticipated to see downtrend in their residential prices this year.

Retail Sector in Asia
Closely linked to the trend of population growth and limited land supply in the urban core, retail rents in Asia largely experienced growth in 2012. New retail supply in the format of community shopping malls will come down the pipeline in decentralised locations outside the city core. Jakarta, Pakistan and Kazakhstan are expected to see the most significant retail rental increase – 20%, 10% and 10% respectively in 2013.

Relatively, the retail real estate markets in Singapore, Ho Chi Minh City and Hanoi in Vietnam are weaker, in which rents are predicted to edge down in 2013.

Industrial Sector in Asia
Following a positive year in 2012, Colliers expects the industrial sector in Asia to continue to perform as the government of China – widely perceived as the engine for the region’s growth - has made massive investments in a number of infrastructure projects since 3Q 2012 and is determined to revive the economy by boosting domestic consumption. Industrial logistics warehousing will benefit in particular with the demand by private enterprises including those engaged in the fast-moving consumer goods (FMCG) sector, which will continue to outsource logistics functions to third-party logistics (3PL) operators to save costs.

Beijing is going to be the star performer of the industrial sector in Asia, with its industrial prices expected to rise 13% in 2013. Jakarta bags the second spot with its average industrial price predicted to increase 11% in 2013, while Hong Kong comes in third with an anticipation of 10% price growth.

In contrast, Seoul and Taipei are predicted to undergo short-term downward adjustments, both edging down by 5% in industrial prices.


Myanmar