30 January 2013

Makati City, Philippines – 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.”

Philippines

 

2012

2013

(% growth YoY)

Rents

Capital Values

Rents

Capital Values

Office 1

9.8%

9.5%

6.5%

4.2%

Residential 2

11%

8.3%

9.5%

6.2%

Retail 3

4%

Flat

4.4%

Flat

Industrial 4

3.3%

Flat

3.2%

Flat

1 Office refers to prime offices in the CBD

2 Residential refers to three-bedroom units located in the CBD

3 Retail refers to shopping malls and superstores located in the CBD

4 Industrial refers to logistics warehouses


With strong demand from the business process outsourcing (“BPO”) sector for prime offices in the CBD area, office rents will see an increase by 9.8% at the end of this year. In 2013 the office rents are expected to slow to 6.5% since a batch of new supply comprising over one million sq m of floor area will be coming to Metro Manila in 2013 and 2014. Due to limited supply in Makati CBD, there will be a continued shift of leasing demand to the fringe areas such as Bonifacio Global City (“BGC”) where more stock is available at cheaper rents.

Meanwhile, the sales market is expected to benefit from the sustained buying interests from both local and overseas companies. The residential market will continue to look strong in 2013 due to the anticipated economic growth in 2013 and the sustained occupational demand from expatriates. However, prospective growth of rents and prices are expected to slow to 9.5 and 6.2%, respectively, since there will be 2,800 new units coming onto the market, representing 12% growth YoY. 

Retail sales remain robust due to the strong consumer spending and the increasing population in the Philippines. Besides the CBDs, more shopping malls and superstores are also expected in the second and third-tier cities. Moreover, the strip-mall concept is likewise a growing trend. Retail rents will generally track with the economy with rents growing between 4 and 5% next year. 

Industrial rents are expected to stay relatively flat next year. Growth in the industrial segment remains restricted due to the high electricity costs and weak global demand. Moreover, electronic products, a major source of Philippine industrial exports, have performed passively over the last few years. Thus, the outlook on industrial rents in 2013 is that they will remain relatively neutral. However, an increase in Japanese companies scouting

 

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 and Hong Kong are the only two 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 following a growth of 18% in 2012. Jakarta bags the second spot with its average industrial rent predicted to increase 11% in 2013, while both Singapore and Hong Kong come in third with an anticipation of 10% rental growth in both markets. 

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