12 June 2012

Following slow economic growth in Asia Pacific in 4Q 2011, the region saw improvement in 1Q 2012 in response to the signs of economic improvement in the US and efforts by the European Central Bank to resolve the sovereign debt crisis. According to Colliers International Asia Pacific Industrial Market Overview, while a majority of the 13 Asia Pacific cities surveyed enjoyed appreciation in industrial land, capital and rental values over the six-month period between October 2011 and March 2012, most reported either stable or a slower growth rate.

On the front of single-user industrial land values, 44 out of 55 submarkets surveyed saw growth or held steady, while the remaining 11 submarkets registered declines during the six months ended in March 2012. “Land values in Karawang and Bekasi areas in Indonesia, rising 38.6% and 24.9% respectively, represented the outstanding growth of industrial land values in Asia Pacific, thanks to sustained economic growth and low labour costs in Indonesia that continued to appeal to manufacturers,” said Simon Lo, Executive Director of Research & Advisory, Asia.

Similarly, majority of the submarkets surveyed (52 out of 58) saw steady or increase in industrial property capital values over the six months ended in March 2012. Shanghai saw exceptional increase in capital values, rising 12% during the period between October 2011 and March 2012, compared to merely 1.4% in the preceding six months. The robust growth was attributed to the lowering of the reserve requirement ratio for banks that stimulated the acquisition of ready-built industrial facilities.

Single-user industrial rents fell in 8 submarkets out of the 53 submarkets surveyed between 4Q 2011 and 1Q 2012, which was more than just one out of 54 submarkets surveyed seeing rental fall in the preceding six months. This was mainly due to weaker rents in New Zealand, where Auckland saw a slowdown in industrial leasing activity and net rents in Wellington region fell for the first time since March 2010.

Relatively, rents of high-specification multi-user industrial facilities were more resilient. Out of the 17 submarkets surveyed, only one of them – Yokohama recorded rental fall due to weak leasing demand while the remaining submarkets reported either stable or rise in rents during the period from October 2011 to March 2012.

“Looking forward, majority of the submarkets surveyed are expected to experience stability or growth in industrial values and rents over the next twelve months, due to healthy demand and reduced vacancy,” commented Lo.  “However, Singapore, Hong Kong and Taipei are anticipated to be the exceptions and will see declines as downside risks in the external environment are likely to affect demand in these submarkets.”

In New Zealand, Wellington is projected to see stable land values, albeit with falling capital value and net rents in the next twelve months because earthquake issues surrounding the property market are expected to remain a dampening factor in the industrial market.