A look at growth sectors in the Asia-Pacific real estate market

By Jonathan Hsu / M&G Real Estate | September 3, 2018 9:00 AM SGT
Economic growth is expected to keep pace across the five developed Asia-Pacific economies — Australia, Hong Kong, Japan, Singapore and South Korea — this year, as the global trade recovery continues to gain momentum, al- though at a slower pace than in 2017.
Key downside risks still remain in the region, however, such as US and Chinese economic policies and environment. A quicker pace of rising rates in the US as well as a Chinese credit shock would have a negative impact on Asia-Pacific’s real estate market. There is also the risk of an escalation of the US-China trade war, but this needs to be considered against the possibility of a China-led Asia trade pact.
Key Asia-Pacific gateway cities such as Hong Kong, Melbourne, Seoul (pictured) and Sydney are expected to grow in the range of 2% to 5% a year on average, from 2018 to 2020 (Credit: Bloomberg)
Office
The office market in the key developed cities in Asia-Pacific should benefit from business growth in the medium term, particularly from technology, finance and business services. The ongoing boom in the technology sector is expected to continue in the near term and serve as a key driver of occupier demand for most markets, backed by further expansion of more established tech firms, an increase in the number of start-ups and the opening of new regional headquarters by foreign firms.
Persistently tight labour market conditions in the developed Asia-Pacific markets are set to continue to drive competition for talent among corporates. As office location and building quality are key to attracting and retaining talent, prime office locations that are close to public transport infrastructure and multiple amenities — such as retail, gyms and parks — stand to benefit.
Key Asia-Pacific gateway cities such as Hong Kong, Melbourne, Seoul and Sydney are expected to grow in the range of 2% to 5% a year on average, from 2018 to 2020. Relatively lower rents in the fringe submarkets of these cities are expected to attract more cost-conscious tenants and capture some rental upside too.
The Singapore prime office market is expected to outperform the region until 2020 because of a limited supply of Grade-A office space in the CBD over the medium term and recovery of traditional, larger occupiers such as financial institutions and oil and gas...