SINGAPORE, 26 October 2018
– Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in commercial real estate services today released its Asia Market Snapshot Q3 2018 report with a detailed overview of all property segments’ performance across 15 Asian markets during the third quarter of 2018.
Colliers notes that market sentiment has become more cautious in some key markets due to more adverse economic and policy conditions. In Hong Kong, policymakers recently raised the key lending rate; Singapore has introduced more cooling measures targeting the residential sector; and authorities in Beijing unveiled new policies during the quarter tightening development restrictions in core areas. Nonetheless, Colliers expects developers and investors to remain cautious overall rather than retreat from the market completely.
Ms. Tang Wei Leng (邓慧玲), Managing Director at Colliers International, said, “The new cooling measures implemented on 6 July 2018 have raised land acquisition cost substantially in Singapore and dealt the market with more uncertainty. Understandably, developers have become more cautious and are taking more time to reassess their strategy as well as to monitor ongoing market dynamics, before making their next move. Well-located sites with good attributes, in areas with less competition and are realistically priced will still be attractive to developers.”
“We believe developers will continue to replenish their land, and the pace at which they do so would depend on their property development pipeline and amount of unsold inventory on their hands. Land acquisition remains an integral part of developers’ business. The current lull in the collective sale market in Singapore probably reflects a ‘crisis in confidence’ among developers who are still evaluating the market conditions after the new measures kicked in,” Ms. Tang added.
The commercial and industrial sectors dominated Singapore’s investment market in Q3 2018. Real estate investment trusts (REITs) and private funds continued to enhance their existing portfolios through acquisitions and divestments. The residential sector took a back seat as developers focused on launching their projects and looking at the encouraging take-up rates. Colliers believes developers will be ready for more price-adjusted land acquisitions in the coming quarters.
Move over residential: investors shift focus to commercial, industrial
While the outlook for residential projects in markets like Hong Kong and Singapore is growing less optimistic, the industrial and commercial sectors remain supported by a range of positive factors. In Hong Kong supply remains tight and a government revitalisation scheme is expected to boost appetite for conversion and redevelopment projects. Meanwhile in Singapore, activity in the industrial investment market will likely continue, especially in niche sectors such as data centres and ramp-up logistics properties.
Gangnam still in style
Transaction prices in Seoul’s highly sought-after Gangnam business district show few signs of flagging, thanks to a tight leasing market and a relatively short supply of investment opportunities. Recent deals include the acquisition of the Samsung C&T Building by a consortium of Koramco REITs and NH Securities for KRW748 billion (USD696 million), which set a unit price record for South Korean commercial property.
Japan continues to draw investors
Market sentiment remains cautiously optimistic due to the central bank’s near zero interest rate policy. A wider yield gap, relative to other markets, should continue to attract more investors from the US, Hong Kong, and Singapore. Moving forward, the focus will continue to be on Tokyo’s office market. Lower than expected supply growth, coupled with larger than expected withdrawals for redevelopment, have contributed to the sector’s recovery.
Retail resurgence in Myanmar, Philippines
Recent moves by the government to open Myanmar’s retail industry further to foreign investors will bring a promising and largely untapped sector into the spotlight. The retail market remains one of the strongest in Yangon, with around 90% occupancy and steadily rising lease rates. Given the city’s relative shortage of large-scale shopping and lifestyle venues, new destination retail establishments with recreation and entertainment features are likely to meet with robust local demand. A move by authorities in the Philippines to ease the minimum capital requirements for foreign retail investments should also encourage more players to enter the previously locally-dominated F&B and home furnishing sectors.
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