CBRE’s latest MarketView and Investment Trends research has reported that the rolling out of Covid-19 vaccination programmes and improving economic outlooks has contributed to a steady increase in commercial property leasing and capital markets activity in Asia Pacific during Q1.
However, with surge in infections in several markets, recovery remains uneven across the region.
India saw a recent surge which has clouded economic and business outlook while countries such as Japan and Malaysia have reintroduced new lockdown measures.
“The reintroduction of lockdown measures and other restrictions in Japan and some emerging markets in Southeast Asia are expected to weigh on real-estate related activity in the coming months,” the report stated.
In the office sector, the report highlighted increased tenant enquiries and more frequent site inspections, as overall occupier demand strengthened during the quarter.
Additionally, regional Grade A net absorption rebounded from a low base to reach 9.1 million sq.ft. NFA.
Strong demand from Technology, Media, and Telecommunications (TMT) and finance companies have also resulted in several major flight-to-quality relocations during the period, including several anchor-tenant deals at newly completed projects.
The report showed that mainland China is leading the office market recovery, while the Singapore and Korea markets have bottomed out.
“The successful control of Covid-19 in most markets and increased office space utilization should help Asia Pacific office leasing demand and rents remain on a recovery track throughout 2021. As employees return, more occupiers are evaluating the feasibility of hybrid working models,” said Ada Choi, CBRE’s Asia Pacific Head of Occupier Research, Data Intelligence and Management,
“At the same time, many firms are rethinking workplace design and taking new physical distancing concerns into account, which may persuade some companies not to shrink their existing office footprint,” added Choi.
In the retail sector, CBRE’s report showed decline in Asia Pacific retail rents by 0.4 percent y-o-y in the quarter compared to the 2.1 percent y-o-y drop in the previous quarter.
“Retailers in most market were more active in looking for new leasing opportunities, particularly in prime locations. Particularly apparent was leasing demand from New Energy Vehicle (NEV) companies seeking prime locations in Mainland China,” CBRE reported.
However, CBRE retains its 2021 forecast of a mild decline in Asia Pacific retail rents.
Industrial sentiment on the other hand picked up in the quarter with global manufacturing Purchasing Manufacturers Indices (PMI) reaching 55 in March, marking a ten-year high.
Asia Pacific logistics rents rose by 0.7 percent q-o-q, the strongest rate of growth since the onset of the pandemic.
CBRE has also highlighted that following the recent Suez Canal obstruction – which caused significant disruption to global supply chains and raised shipping costs for major global shipping companies serving global retailers, e-commerce platforms and manufacturers – occupiers are also revisiting safety stock strategies and increasing inventory levels.
This is expected to drive demand for bonded warehouses, distribution centres and warehouses serving port facilities in the months ahead.
Q1 also saw Asia Pacific commercial real estate investment sales totalled US$26 billion, registering an increase of 12 percent y-o-y. Investment sentiment continued to strengthen over the quarter, with many markets reporting higher enquiry levels.
According to CBRE, logistics remained the hottest asset class, with yield continuing to compress across most markets. Business and high-tech parks catering to tech tenants continued to be another area of interest for investors, especially in Mainland China and Singapore.
“Overall purchasing appetite for commercial property assets is strong, led by private investors. Funds are also actively reviewing acquisition and disposal opportunities, buoyed by current liquidity and pricing levels ahead of upcoming fund expiries,” said Dr. Henry Chin, Global Head of Investor Thought Leadership and APAC Head of Research for CBRE.
“Non-core assets and businesses will continue to be disposed in the coming months as corporates recycle and repatriate capital to reduce debt. We expect Asia Pacific investment volume to increase by 10% in 2021, driven by purchasing activity and disposals, led by funds and developers.”