Extended U.S.- China trade sanctions likely to weigh on interregional property capital flows, hurt confidence in office leasing markets in greater China, and affect demand for U.S. industrial real estate
Washington has shattered the truce in the U.S.-China trade war by announcing that existing tariffs of 25% on $250 billion ($ denotes U.S. currency) of Chinese imports will be extended, with a 10% tariff applied to nearly $300 billion of remaining imports from 1 September. The chances of a protracted trade war have now increased.
Despite active recent interest from Singapore and South Korean capital in global property markets, trade tensions appear to be weighing on both Asia-toglobal and global-to-Asia property capital flows. In contrast, intra-Asian property capital flows still look firm.
In Asian leasing markets, we expect falling confidence among tech firms in South China, despite firm long-run prospects. The Shanghai and Beijing office markets have been affected by both delayed demand due to the trade war and heavy new supply. If trade war resumes, Hong Kong SAR may have more to lose than mainland Chinese cities, given high multinational occupancy and reliance on finance. It is reasonable for large occupiers to consider expansion in other markets to mitigate risk.
In contrast to Asia, the impact of the trade tensions on U.S. office occupiers is likely to be minimal. However, demand for U.S. industrial property could be undermined. Notably, demand from manufacturing occupiers could decline, hurting regions in the Midwest and Southeast.