Ample liquidity, improving business sentiment fuel market activity across Asia Pacific.
- In Australia and New Zealand, markets emerging from COVID-19 restrictions prepare for a busy Q4
- In China, domestic and foreign investors spur deal-making in major markets
- Korea’s office segment deal volume eclipses performance in previous quarters
- Hotel, retail segments drive transactions in Hong Kong and Singapore
SINGAPORE, 20 October 2021 – Leading diversified professional services and investment management firm Colliers (NASDAQ and TSX: CIGI) has today released its Asia Pacific Market Snapshot | Q3 2021 report, which shows that the region’s key property markets withstood the latest round of COVID-19 restrictions introduced in response to the COVID-19 Delta variant, and the momentum is expected to pick up in the last quarter to help end the year on a strong note.
In Australia, business confidence continued to improve, as markets began to emerge from protracted restrictions, while in China, investors struck deals in key markets. In Hong Kong, the industrial and hospitality sectors attracted healthy capital flows, while retail was a major mover in Singapore. Japan’s property markets, once again, proved to be resilient in the face of stringent controls, while Korea’s office sector continued to perform well, owing to enduring demand for office space in Seoul.
The report, which examines the previous quarter’s performance of property markets in 16 Asia Pacific (APAC) countries and territories, also provides forecasts for the current and upcoming quarters.
“Improving business confidence combined with ample liquidity led to a pick-up in transactions involving both domestic and foreign investors and end-users, especially in the commercial segment, in most major APAC markets in Q3,” said Terence Tang, Managing Director, Capital Markets & Investment Services | Asia. “We expect activity to kick into a higher gear, as investors try to bring long-running negotiations to fruition, and funds look to allocate more of their capital for 2021, before the year draws to a close.,”
John Marasco, Managing Director, Capital Markets & Investment Services | Australia and New Zealand, opined: “With the path out of COVID-19 restrictions announced in Australia and a significant easing of control measures to look forward to once vaccination rates reach satisfactory levels, we are seeing a renewed sense of optimism in the market. Campaigns that had been on hold will once again come alive and we expect to see a large volume of supply in Q4. In New Zealand too, where the benefit of past experience has helped limit disruptions, an easing of restrictions will boost confidence and increase sales and leasing activity in the commercial segment.”
Renewed optimism in Australia, New Zealand property markets
As Australian cities emerge from prolonged restrictions, which lasted for much of the third quarter, there is an overall improvement in business sentiment. In Sydney, we expect a stock surge usually seen in Q3 to come through in Q4 or early Q1 2022. With demand for office space still going strong, we expect enhanced interest across investment-grades, especially in the central business district (CBD). In Melbourne, the pipeline for both CBD and metro transactions is building up in anticipation of a resumption of travel across state lines and we foresee opportunistic transactions in Q4. In Auckland, where a low-interest-rate environment is fuelling competition for prime assets, major occupiers struck some of the largest leasing deals in a decade. As the vaccine programme picks up pace, it will further boost market confidence, spurring sales and leasing activity specifically in the hospitality, large-format retail and defensive industrial segments.
Chinese markets propelled by healthy demand for commercial assets
Robust demand from both domestic and foreign buyers saw the completion of 22 transactions across key markets in China. Shanghai saw nine deals worth RMB12.6 billion (USD1.95 billion) close in Q3 led by demand for offices and business parks from end-users. In Beijing, eight transactions were completed with a total value of nearly RMB8.81 billion (USD1.36 billion). In southern China, Shenzhen saw two transactions with a combined worth of RMB3.33 billion (USD512 million) and a hotel transaction worth RMB955 million (USD148 million) was finalised in Guangzhou. Chengdu and Xi’an recorded one transaction each.
Hong Kong’s hospitality sector sees welcome capital inflows
Growing investor confidence, stimulated by low interest rates and a healthy economic rebound, saw the finalisation of six en-bloc sales in the industrial segment and total investment transaction volumes worth HKD18.9 billion (USD2.4 billion) in Q3. Hotel assets received an influx of capital helping the segment register sales worth USD202 million, the highest quarterly total since Q2 2020. Institutional investors remained active, accounting for 62% of all transactions. We expect the industrial, neighbourhood retail and strata-offices segments to continue to attract investor attention, while transaction volumes will be further enhanced by real estate funds seeking to deploy capital before the year-end.
Retail assets become major movers in Singapore
Singapore witnessed transactions worth SGD7.5 billion (USD5.5 billion) in Q3, led by investor demand, particularly in the retail segment, which saw Lendlease Global Commercial REIT increasing its stake in a suburban mall. The residential market saw developers acquiring redevelopment sites through both the Government Land Sales programme and collective sales. On the other hand, the office and industrial segments were subdued, as REIT activity fell during the quarter. We expect a number of deals that have been in the negotiation process for months to be closed by the year-end.
Seoul office space remains the engine of growth in Korea
Abundant liquidity, low interest rates and limited opportunities for outbound investment continued to fuel the Seoul office market, helping it to record transactions worth KRW4.9 trillion (USD4.2 billion) and eclipse volumes seen in the previous quarters. Q3 also saw the attention shift to Pangyo Technovalley, south of the in-demand Gangnam Business District, following the lifting of a decade-long restriction on resales. Several major transactions are expected to close before the year-end.
Japan property markets record strong quarter despite health emergency
Defying the country’s fourth round of COVID-19-related restrictions, Japanese property markets, especially the office, multifamily and logistics sectors, continued to attract investor attention. The acquisition of Iidabashi Grand Bloom by Nippon Building Fund marked Q3’s largest transaction, while REITs recovered to pre-COVID-19 levels. Investor appetite for prime offices in central Tokyo remains strong, defusing concerns of a downturn, as most tenants eschew a drastic switch to hybrid work arrangements. At the same time, the hard-hit travel and hospitality industries are also seeing a resurgence of optimism, fuelled by rising vaccination rates and expectations of an easing of border-control measures.
Download Colliers' Asia Pacific Market Snapshot | Q3 2021 report here.