Asia Pacific Commercial Property Markets Slowly Rebounding Post Covid
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According to CBRE’s latest MarketView and Investment Trends Research, the start of COVID-19 vaccination programs, and improving economic prospects all contributed to a steady surge in commercial property leasing and capital market activity in the Asia-Pacific region in the first quarter of 2021.
However, the recovery remains uneven across the region, with country dynamics largely correlating with levels of success in containing COVID-19. This has been illustrated by the recent surge in infections in India, which has further dampened the economic and business outlook, while the reintroduction of lockdowns and other restrictions in Japan and some emerging markets in Southeast Asia is expected to weigh on the property-related impact in the coming months.
Office Sector Highlights
In the office space, CBRE’s MarketView report is increasingly highlighting tenant inquiries and more frequent site inspections as demand for users increased overall for the quarter. Regional Class A net absorption rebounded from a low base to 9.1 million square feet of NFA (+ 1.5% quarter over quarter and -2.7% year over year).
Strong demand from technology, media and telecommunications (TMT) and finance companies resulted in several large moves from quality to quality during the period, including several anchor leases on newly completed projects. Mainland China is leading the office market recovery, while Singapore and Korea markets have bottomed out.
The constant pre-letting activities offset the effects of the new offer. The recovery in demand ensured that the regional vacancy rate rose only slightly and reached 14.8% at the end of the quarter. The decline in class A rents in the Asia-Pacific region slowed from 1.2% QoQ in the first quarter of 2021 to 0.7% QoQ, leading to a year-over-year decline to 5.0%.
Ada Choi, CBRE director of Occupier Research, Data Intelligence and Management in Asia Pacific, said, “The successful control of COVID-19 in most markets and increased office space occupancy should help drive demand for leases as well Asia Pacific Rentals Remain on Recovery Through 2021 With the return of employees, more and more users are evaluating the feasibility of hybrid work models. At the same time, many companies are rethinking workplace design and considering new concerns about physical distancing, which may convince some companies to abandon their existing ones Office supplies do not decrease. “
Retail sector highlights
In retail, retail rents in the Asia-Pacific region decreased 0.4% year over year in the first quarter of 2021. That is a slower decline than the 2.1% year-over-year decline in the previous quarter. This quarter’s improved performance was mainly driven by the return of rents in tier 1 cities in mainland China.
Retailers in most markets were more actively looking for new leasing opportunities, especially in prime locations, aided by steady improvements in retail sales and consumer confidence. Demand for leasing from New Energy Vehicle (NEV) companies looking for prime locations on mainland China was particularly evident.
Although the leasing market will continue to favor tenants in the medium term, availability is now starting to tighten. However, CBRE maintains its forecast for 2021 for a slight decline in retail rents in the Asia-Pacific region.
Industrial sector highlights
Industry sentiment continued to pick up in the first quarter of 2021, with global manufacturing purchasing indices (PMI) hitting a ten-year high of 55 in March. The warehouse demand remained positive. Net absorption in Asia was 15.6 million square feet, the highest total for the first quarter in recent years. Logistics rents in the Asia-Pacific region rose 0.7% compared to the previous quarter, the strongest growth rate since the outbreak of the pandemic.
Large 3PLs and ecommerce users fueled leasing demand this quarter, helped by the emerging needs of a number of alternative industries including community shopping platforms, central kitchens, food delivery providers and pharmaceutical companies.
After the recent obstruction on the Suez Canal, which severely disrupted global supply chains and increased shipping costs for large global shipping companies serving global retailers, e-commerce platforms and manufacturers, users are also rethinking safety stock strategies and increasing inventory levels.
This is expected to drive demand for bonded warehouses, distribution centers and warehouses for port facilities in the coming months.
Asia Investment Trends
CBRE’s study also shows that Asia Pacific commercial real estate investment revenue was $ 26 billion in the first quarter of 2021, up 12% year over year. Investment sentiment continued to improve during the quarter, with many markets reporting higher demand.
Logistics is still the hottest asset class. In most markets, returns are further compressed. Business and high-tech parks for tech tenants remain another area of interest for investors, particularly in mainland China and Singapore, underscored by the resilience of tech companies throughout the pandemic.
Retail is gaining interest as a countercyclical game. Strong domestic tourism consumption in mainland China, declining capital values in Hong Kong and a rebound in J-REIT prices in Japan are attracting capital to the sector. Investors are also considering the hotel industry to reposition themselves.
“The general buying appetite for commercial real estate is strong, led by private investors. The funds are also actively examining acquisition and disposal opportunities that will be supported by current liquidity and price levels prior to the fund’s imminent expiry,” said Dr. Henry Chin, Global Head of Investor Thought Leadership and APAC Research Director for CBRE.
“Non-core assets and businesses will continue to be divested in the coming months as companies recycle and repatriate capital to reduce debt. We anticipate investment volumes in the Asia-Pacific region to increase 10% in 2021 which is due to buying activity and divestments led by funds and developers. “