Financial, technology sectors seen driving demand until 2019

2017 ASIA PACIFIC MID-YEAR OUTLOOK

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2017-FORECAST-infographics

A key theme that will dominate the Asia Pacific’s commercial property market in the next three years is the rapid growth of the BFSI (Banking, Financial Services and Insurance) and technology industries. This expansion, along with other office-using sectors, will lead to a record annual average of over 100 million sf of new office space requirements by the end of 2019.

This new office space requirement will be in part met by new development; 2017 will be a record year, with nearly 150 msf of new office projects slated for completion across the 25 major cities that we track. China’s Tier 1 cities are set to see the bulk of the region’s additional projects. With high-quality tenants looking for efficiency and modern facilities, nearly half of the projects coming online this year are already pre-committed. High rents will persist and even remain at record levels in 15 of the markets through 2018, partly due to availabilities being concentrated in high-end spaces.

However, in some markets, surplus supplies have led to easing rental growth. For emerging markets, this deceleration will continue through 2019, with more than half expecting vacancies in excess of 14%.

KEY TAKEAWAYS

  1. There has been a pickup in leasing activity across the board, especially from the banking, financial services and insurance (BFSI) and technology sectors.
  2. This is a record year for new supply. Nearly 150 msf of new office supply is scheduled for completion, mostly in China’s Tier 1 cities.
  3. Rent growth is expected to moderate. Nearly half of the key 27 cities are expected to show flat or declining rents. Exceptions in emerging markets are Manila, Bangkok, Bengaluru, Hyerabad. Exceptions in core markets are Sydney, Hong Kong’s Greater Central and Singapore.
  4. Cross-border investment volumes reached a record USD31.2bn in the first five months of 2017. Cross-border momentum is expected to remain strong in the latter part of the year.

While the leasing market will see different performances, overall cross-border investment in the region is set for an impressive finish, with volume in the first five months of 2017 reaching US$31.2 billion—the highest ever. While the growth in cross-border flows so far this year is still slightly less than the annualized pace required to match 2016’s peak of US$96.3 billion, we expect activity to accelerate in the latter part of the year, with strong land sales and sustained accommodative monetary conditions remaining conducive to momentum.

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