Analyzing Real Estate Markets in the Asia-Pacific Region
The real estate market in the Asia-Pacific region has experienced various trends and developments in recent years. This article will examine the current situation in different sectors of the market, such as office spaces, commercial centers, logistics, serviced apartments, and hotels.
Office Space Rental Market Shows Signs of Recovery
The premium office space rental market has shown a slow but steady recovery in the second half of 2023, with rental prices ranging from -4.6% (Manila) to 12% (Mumbai). Most cities are either in the late upswing, late downswing, or early downswing phases of growth. However, only nine out of the 21 markets have recorded growth in rental prices when measured in local currency. These markets are facing a shortage of high-end supply, particularly in Mumbai, Brisbane, Seoul, and major cities in Southeast Asia like Singapore and Kuala Lumpur.
Conversely, several markets are facing an oversupply of office spaces, leading to low occupancy rates and downward pressure on rental prices. Manila, Guangzhou, and Hong Kong are examples of cities experiencing this situation. The appreciation of the US dollar has had various effects on different markets, especially those with weaker domestic currencies like China and Japan. For instance, Tokyo, Beijing, Shanghai, and Shenzhen have all seen a decline in rental prices when measured in local currency (-1.6%, -1.7%, -1.5%, and -0.4%, respectively). However, when measured in US dollars, these markets have experienced an increase in rental prices (Tokyo: 0.5%, Beijing: 0.3%, Shanghai: 0.6%, and Shenzhen: 1.7%).
According to Matthew Powell, Director of Savills Hanoi, “In comparison to other markets in the Asia-Pacific region, office rental prices in Vietnam are still relatively modest. Particularly in Hanoi, the launch of major projects from now until 2026 could put pressure on rental prices, especially in Grade A projects. Additionally, given the projected economic growth and operational efficiency of various industry sectors in the next three years, office rental prices in Hanoi are expected to remain stable. Therefore, this is an opportune time for tenants to consider high-quality spaces within a reasonable budget.”
Commercial Centers Show Signs of Recovery
The premium commercial center market has also shown signs of recovery. Benefiting from strong tourism activities and high domestic consumption, most markets have recorded stable or slight increases in rental prices. Cities such as Hanoi (5.7%), Osaka (5.4%), and Hong Kong (3.2%) have shown the highest rental price growth.
Seoul is the only market that has seen a decline of -5.9% in rental prices when measured in local currency, attributed to a decrease in consumer spending and a prevailing tenant market. In 2024, slower economic growth and reduced consumer spending may affect rental price recovery. However, the recovery of the tourism industry could bring about more positive developments.
Regarding the retail market in Hanoi, Matthew Powell noted, “In the early months of 2024, Hanoi continues to attract substantial interest from international brands and has shown signs of recovery. Some brands have completed feasibility studies or are in the process of negotiating contracts. However, the recovery is not evenly distributed, with some major commercial centers experiencing growth in sales while others struggle to compete in terms of rental prices and occupancy.”
Logistics Market Shows Positive Development
According to Savills, the logistics market has experienced the most positive development compared to other segments. Rental prices have fluctuated between -1.3% (Hong Kong) and 7.4% (Sydney). Most markets maintain rental price growth in the second half of 2023, although the growth rate has slowed due to a decline in e-commerce demand and global trade activities. Hong Kong is the only market that has seen a decline at the end of 2023, mainly due to weak rental demand, slow retail recovery, and reduced international trade activities.
Positive Future Outlook for Serviced Apartments
Rental prices for serviced apartments have remained stable across most markets, ranging from -3.4% (Kuala Lumpur) to 5.8% (Taipei). Taipei has experienced the highest rental price growth in the latter half of 2023, reaching the highest level since the first half of 2010, thanks to improved rental sentiment. Some markets have seen slight rental price increases in the second half of 2023, supported by stable demand for high-end apartments, including Hong Kong, Osaka, and Guangzhou.
Matthew Powell states that in Vietnam, the strong increase in FDI has continued to boost the recovery of the serviced apartment segment. Additionally, Hanoi has set targets for the development of industrial parks and clusters, such as the Hoa Lac Hi-Tech Park, while also focusing on developing infrastructure for electricity, telecommunications, and information to attract foreign investors. These developments will have a positive impact on future demand for serviced apartments.
Hotel Rental Prices on the Rise
Hotels have remained a bright spot in the market during the first half of 2023. The majority of markets have seen an increase in room rates due to the recovery of international tourism. Hong Kong experienced the highest growth in room rates across the region, benefiting from the return of mainland Chinese tourists.
Other popular tourist destinations, such as Hanoi (26.2% year-on-year increase), Taipei (25.5% year-on-year increase), and Ho Chi Minh City (14.4% year-on-year increase), have also recorded price growth. However, Tokyo and Osaka in Japan have experienced a decline in room rates, mainly due to prices returning to normal after the previous peak season.
In conclusion, the real estate market in the Asia-Pacific region offers various opportunities and challenges across different sectors. As the market continues to evolve, it is important for investors to carefully analyze each market’s dynamics and potential for growth. For more information on real estate and the latest industry insights, visit Business Today.