Office, industrial and logistics sectors set stage for sustained rebound.
HONG KONG, 20 April 2021 – Leading diversified professional services and investment management firm Colliers (NASDAQ and TSX: CIGI) today released its Asia Pacific Market Snapshot Q1 2021 report, which examines the previous quarter’s property market performance in 19 Asia Pacific markets, and provides forecasts for the current and upcoming quarters.
Generally, property markets across the region performed well to set the stage for a sustained recovery in coming months. The office segment drove growth in Australia and Korea while China’s impressive economic recovery attracted investors to a mix of commercial properties. Industrial assets held sway in Singapore and Hong Kong, and Japan witnessed the completion of several commercial and residential transactions, according to the report.
“The region’s property markets are off to a strong start having capitalised on the momentum from the previous quarter,” Terence Tang, Managing Director, Capital Markets & Investment Services | Asia, said. “We expect the industrial segment will continue to do well by riding the e-commerce wave while office assets will receive a boost from people returning to work in growing numbers. Overall, the coming months will see the recovery strengthen thanks to easy liquidity and market-friendly government initiatives coupled with the roll-out of vaccines and expectations of borders eventually reopening.”
China’s economic revival renews investor demand
All key Chinese cities saw a flurry of deals in the first quarter as the country’s strong economic performance during a difficult year revived confidence among domestic and foreign investors. While Beijing recorded nine deals in Q1 - more than in the last six months of 2020 combined - Shanghai saw 11 deals, mainly in the office and business park segments.
Four deals each were finalised in Chengdu and Xi’an while the industrial sector did well in southern China, with Guangzhou witnessing a record deal worth RMB7.23 billion (USD1.1 billion) involving Blackstone for the largest logistics park in the Greater Bay Area.
Industrial assets anchor Hong Kong market recovery
Industrial asset investments picked up in Q1 with volumes rising 191% over Q4. The heightened activity was aided by the removal late last year of double stamp duty on commercial transactions. A new government initiative to encourage the redevelopment of industrial buildings will also support the market in the months ahead.
Industrial subsectors such as logistics and data centres will continue to attract long-term capital while the residential segment will see growing interest from developers keen to make the most of resilient prices and pent-up demand.
Commercial, retail lead the way in Singapore
The industrial sector was the highlight of Q1, which saw the announcement of some notable deals following months of negotiations, and volumes climbed 19% QoQ to SGD3.56 billion (USD2.66 billion). We expect investor interest in commercial and industrial properties to rise further in the second quarter, as optimism grows about the resumption of normal business activities amid the ongoing rollout of vaccines.
The retail sector will also attract investor attention, especially aimed at suburban malls that have withstood the challenges of 2020.
Korea office market remains in high demand
Low interest rates continued to fuel liquidity and demand for core assets in the Korean commercial real estate market, with major office transaction volumes reaching KRW2.4 trillion (USD2.1 billion) in Q1.
As border restrictions limit outbound investments, competition will grow for a limited supply of high-quality assets, further escalating prices in major submarkets and depressing cap rates. These trends are expected to direct investor interest towards logistics assets, in turn hiking prices and depressing yields in the segment.
Investors in Japan shrug off challenges
The quarter saw large transactions being finalised across segments as investors remained undeterred by ongoing border restrictions and a renewed state of emergency in major metro areas. Logistics and residential assets remain the most sought-after and are seeing sustained interest despite closed borders posing a significant barrier to overseas capital. Investors are also considering office assets in markets beyond the Greater Tokyo region.
Fresh optimism lights up quiet Q1 in Australia, New Zealand
Investor confidence continues to improve in Australia and New Zealand, due to a combination of factors such as workers returning to their offices, the rollout of vaccines, low interest rates, and the prospect of international borders reopening soon.
In the Sydney CBD, where leasing inquiries jumped to five-year highs, core-plus and value-add investors will become more active while Melbourne will also see more activity, both on and off market. In Brisbane, where the CBD office market outperformed all others nationwide in 2020, we expect a significant increase in investment interest in H2.
In Auckland, investors are expected to be drawn to commercial assets, especially industrial and bulk retail properties, which are attracting strong demand from tenants.
Download the Asia Pacific Market Snapshot Q1 2021 report here.