Dr. Jane Murray, head of research for the Asia Pacific region for Jones Lang LaSalle, made a dandy presentation on Nov. 19, 2013, at Institutional Real Estate, Inc.’s fourth annual VIP – Asia Investor Roundtable conference in Hong Kong. The following are some highlights from that presentation.
The office sector:
- China and India will account for two-thirds of the new supply coming to market during the next several years.
- Expect more subdued office leasing activity to push regional vacancy rates up a bit in the months to come.
- Capital value growth throughout the Asia Pacific region has been outpacing rental growth — and the spread between the two appears has been widening over the past several years.
- Rental rates throughout the region have been on the mend, but they still have not returned to peak from trough levels.
- Asia Pacific capital values in some regions, however, have risen above prior peak levels already.
The investment markets:
- Global direct real estate investment volume continues to strengthen, in Asia as well as in the Americas and throughout Europe, the Middle East and Africa.
- Asia Pacific regional transaction volume has been up 33 percent on a year-over-year basis and is up 25 percent from 2012 levels so far year-to-date in 2013. In Japan, which leads the pack, transaction volume is up nearly 70 percent year-to-date.
- Office (49 percent) along with retail (14 percent) and industrial (14 percent) account for the vast majority — 87 percent — of total regional transaction volume
- Cap rates in the region range from lows near 3 percent (in Hong Kong) and highs near 8 percent (in Jakarta). The overall trend in cap rate momentum has been gradual and decidedly down, except for Tokyo, Shanghai and Sydney, where cap rate movement has begun to flatten out recently.
- Meanwhile, the spreads between the prime (10-year Treasury) yield and office cap rates have begun to tighten a bit, except in Singapore and Tokyo, where they recently have begun to widen again.
Asia Pacific real estate outlook:
- Regional economic growth will strengthen even further.
- There should be a moderate pick-up in office leasing demand.
- Expect to see single-digit rental growth across most markets and sectors, as well.
- Overall, 2014 should be another strong year for investment activity.
- The downside: downward pressure on residential prices in some markets.
For more information, contact Jane Murray.
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Geoffrey Dohrmann is president and CEO of Institutional Real Estate, Inc.
