Expectations of further economic recovery across Asia Pacific had buoyed real estate markets in Q4, bolstering hopes of a further rebound in 2022.
- Demand for office property spurs Asia Pacific rebound as workplaces reopen
- Japan’s property market set for recovery as economic activity picks up
- Seoul’s office market continues to outperform, as deals reach KRW3.7 trillion (USD3 billion)
- Domestic buyers drive demand in China, with deals in Shanghai surging
- Easing of lockdowns propels occupier market in Sydney and Melbourne
SINGAPORE, 25 January 2022 – Leading diversified professional services and investment management firm Colliers (NASDAQ and TSX: CIGI) has today released its Asia Pacific Market Snapshot | Q4 2021 report, which demonstrates how receding COVID-19 restrictions and expectations of an economic recovery across the region had buoyed real estate markets during the quarter, bolstering hopes of a further rebound in 2022.
In Australia, activity in the occupier markets picked up as lockdowns eased in the major cities. In China, domestic buyers led the completion of several deals in the key markets and segments, while local investors acquired assets in the retail sector. Meanwhile, the outlook for Japan’s property sector improved, as economic activity normalised. Commercial property transaction volumes in Taiwan hit a record high, amid a robust momentum fuelled by occupier buyers and investors. Additionally, investment activity in Singapore and Seoul’s office markets remained strong, while residential property developers in India sought new acquisitions.
The report, which examines the previous quarter’s performance of property markets in 16 Asia Pacific countries and territories, also provides forecasts for the current and upcoming quarters.
“Major property markets in the region ended the year on an upbeat note, especially in the office segment, as governments relaxed COVID-19 restrictions, workers returned to offices, and investors began to travel,” said Terence Tang, Managing Director, Capital Markets & Investment Services | Asia. “We expect deal making activity to continue to gather momentum across segments in 2022 as vaccines reach more people, borders reopen, and the world learns to live with COVID-19 as an endemic virus.”
John Marasco, Managing Director, Capital Markets & Investment Services | Australia and New Zealand at Colliers, noted: “High vaccination rates in Australia boosted investor sentiment during the quarter and the end of 2021 marked a record year for transaction volumes at AUD414.6 billion (USD298 billion) across core sectors in Australia. We are confident that the opening up of Sydney, Melbourne and other major metropolitan areas will continue to underpin the occupier market in 2022. In New Zealand, we expect the property sector to remain buoyant as demand emerges for a range of assets beyond safe havens, such as prime-grade industrial and retail premises, and expectations of a phased reopening of borders grow.”
Australian occupier markets, New Zealand’s commercial assets in focus
As lockdowns in major Australian cities eased following fully vaccination targets being met, offices began to reopen and we saw increased momentum return to occupier markets. In Sydney, market activity resumed with the release of pent-up demand and unsatisfied capital from earlier in the year. Additionally, interstate travel picked up, as Melbourne emerged from lockdown, which enabled property inspections and rekindled interest in occupier markets and led to the finalisation of several deals. We expect confidence in the Central Business District (CBD) office market to continue into 2022, as many companies are looking to upgrade their premises as a the flight to quality theme continues to play out.
In New Zealand, we expect an uptick in investment activity in Auckland to propel the total value of commercial and industrial property sales to record levels in 2021, while solid economic expansion will likely support demand and investment activity in the upcoming quarters.
Deal-making in China continues at pace, Shanghai transactions surge
Key Chinese cities recorded more than 30 deals during the quarter, with transactions in Shanghai more than doubling from a year ago to 21. Domestic investors were major contributors, with Ping An Life Insurance’s acquisitions of Raffles City Changning and Raffles City Shanghai valued at over RMB18 billion (USD2.84 billion).
Beijing recorded four transactions in Q4, with a total value of nearly RMB6 billion (USD942 million). Meanwhile, Shenzhen and Guangzhou recorded a total of three transactions with a combined worth of nearly RMB5 billion (USD780 million) and domestic investors in Chengdu closed three deals worth nearly RMB6.2 billion (USD973.2 million).
Border relaxation hopes buoy Hong Kong’s retail sector
Hong Kong’s retail sector witnessed strong deal-making activity, amid hopes of a reopening of the border with the mainland. Commercial investments increased 9% QOQ to HKD20.6 billion (USD2.6 billion), with industrial assets accounting for a major portion of the volume. We anticipate industrial properties and neighbourhood retail premises to continue to attract interest, with international funds and local investors steering the market in the near term. Expectations of a recovery in rents are likely to bolster interest in office assets in 2022.
Private equity funds and family offices snap up Singapore CBD spaces
In Singapore, several deals involving office buildings were closed during the quarter, following months of negotiations. A number of private equity funds and family offices acquired prime properties, such as One George Street, which was purchased by J.P. Morgan and Nuveen Real Estate for SGD1.28 billion (USD935.7 million) in November 2021.
We expect investment activity to pick up, as vaccination rates increase even as the safe-haven appeal of Singapore’s property market continues to attract buyers.
Deals in Seoul office market continue to surge
Total deal volume in Seoul’s office market reached KRW3.7 trillion (USD3 billion), following the closing of several major transactions. Office transaction sizes and volumes trended up during the quarter, mainly due to increased activity from Real Estate Investment Trusts (REITs), and we expect office transaction volumes in 2022 to be similar to the levels seen in 2021.
Demand for properties in the Pangyo Technovalley region increased this year and we saw investor interest expand to the Bundang area. Going forward, we anticipate increased activity in the Magok district.
Economic rebound to underpin Japan’s property market
The end of Japan’s fourth COVID-19-related state of emergency spurred a gradual improvement in economic activity, paving the way for a recovery in the nation’s property market. Japanese REITs remained active in the office sector in Q4, while retail property transactions in central Tokyo and hotel deals in Osaka and Sapporo signalled a rebound in investor interest, following a period of subdued activity.
We expect capital values to fall slightly, reflecting lower rental incomes, especially in the office sector. Investor appetite will be enhanced, amid expectations that the Bank of Japan will retain its easy monetary policy, and we expect capitalisation rates to remain around the current levels.
Download Colliers' Asia Pacific Market Snapshot | Q4 2021 report here.