The office real estate outlook of most of the Asia pacific cities look promising with increase in rental yields & capital appreciation. As per the report published by CBRE, office real estate in Asia Pacific region has witnessed a Q-o-Q appreciation of 0.9%, whereas absorption has increased by 13%. On a Year-o-Year (Y-o-Y) basis, however, the absorption has reduced by 10%.
The market sentiments in Asia Pacific region is driven by stability in the financial markets, expansion in new & existing businesses & a positive economic & political outlook. Nearly 50% of the cross border international investments has been contributed by Australia & Japan.
On the backdrop of an appreciating economic momentum, Australian office real estate appears bullish at present. In Melbourne, a total GLA of 727,000 Sq. M has been absorbed, taking the total absorption to over 1.7 million Sq. M. over the last 12 months.
Australian economic outlook in 2016
Australia is considered as one of the most transparent property market across the globe & this helps it in receiving large volume of cross border investment.
The occupancy level of Melbourne has been estimated at 88%, a 0.6% raise on a Q-o-Q basis, as per JLL report. The occupancy is way higher in Sydney, where it is hovering northward of 90 %.
Positivity is persisting in Japanese market on the backdrop of expansion by e-commerce ventures & online food retails coupled with general positive outlook that draws its strength from transparent & stable real estate & Tokyo’s winning the bid to conduct 2020 Olympics.
Major regional investors from the Mainland China, Singapore & Hong Kong are investing in office real estate of Tokyo & Oslo. The next wave of construction is expected to be completed by the end of 2018 & this will keep the demand outstripping the supply. A positive economic outlook that will result into increased corporate hiring will further boost the demand.
Overall sentiments continue to be subdued in Singapore in line with a slowdown in economic growth. As per Colliers, the office real estate has witnessed 5th Q-o-Q correction in the rental yields. The downward pressure is more in the Grade-B class assets as flight to quality is inducing many companies to leave their existing office & look out for better options. However, with large supply of Grade-A office buildings expected to enter the Central Business Districts (CBD) of Singapore, the Grade-A office space is also expected to moderate soon in the times to come.
Other major emerging bright spots in the region include, Vietnam & Myanmar. The realty sector in Vietnam has attracted a total FDI of around USD 1 billion in the 1st nine months of 2016. Major source of investments are Japan, Singapore & other countries in ASEAN. With an impressive GDP growth rate that has averaged at around 5% over the last 18 years, Vietnam’s office real estate market is expected to continue showcasing a stellar performance.
The office real estate in Vietnam is also correlated to rapidly expanding job market & exponential growth in individual businesses & ventures. In Q3, a total of around 32,000 new business licenses have been issued, out of which around 7500 have started their operation. The new businesses are expected to boost the job market by over 350,000, thereby stimulating the demand of quality office units.
The spiraling construction boom in major cities such as HCM City is now making quality space in prime locations, almost a scare resource. The bullish sentiments are expected to further move northwards with average annual GDP estimated at 6.5% in next 3 years.
In Myanmar, the office real estate is driven by the country’s gradual transition into a stable democracy & its recent impressive growth, that makes it one of the fastest growing economies in the world. Although GDP growth in Myanmar is expected to moderate in 2016 at 6.5% per annum due to slowdown in global commodity market- The country continues to witness opening of new offices, not just from regional businesses but also from other global MNCs such as Google & Citi Bank.
