Asia Paciﬁc remains on course to lead “three-speed” global economic recovery
The Asia Paciﬁc region remains on course to lead the “three-speed” global economic recovery, outpacing the US and European regions, albeit with some bumps in the road, as corporate occupiers’ positive sentiment for operations in the region presents opportunities to grow real estate asset values.
Recent stock market volatility may have put greater focus on global macro-economic uncertainty; however, the two largest challenges, the US and European debt crises, have provided the economic backdrop since 2010. The underlying business fundamentals for corporate occupiers have not suddenly changed. In most parts of the region, consumer and business sentiment remains positive.
General sentiment across the region is that Asia will continue to grow in signiﬁcance, and as a proportion of global revenue, for the majority of multi-nationals. This demand is compounded by growing domestic corporations that have been especially active in Tier I Chinese cities. With the US and European regions presenting greater challenges and posing more risk in the form of low consumer demand and regulatory pressures, a greater proportion of revenue and growth must continue to be apportioned to operations in Asia.
The trickle-down effect of this trend will be the expansion of corporate operations in the Asia Paciﬁc region with further deployment of capital and labor. Generally, headcount among occupiers is stable or expanding in the region. This demand has been a contributing factor in the rental growth witnessed in the majority of markets across the region as we continue to see high activity levels. Beijing witnessed Grade A ofﬁce rental growth of 17% during the ﬁrst half of 2011, Jakarta 25% Shanghai 11.5%, Singapore 8.5%, and Hong Kong 16%. Notably, these increases have been recorded in a region where approximately 14 million sq ft of Grade A ofﬁce was completed during 2Q11.
Both the fundamental demand from high-quality occupiers and the rental growth across the region have provided landlords with the opportunity to move their asset values in an upward direction. It has also been a catalyst to re-position below-prime assets or secondary districts, which have beneﬁted from occupiers relocating from high rental building or districts where rents have put too much pressure on overheads. We envisage that there will continue to be opportunities to increase asset values as corporate occupiers grow their footprints in the region and expect rents to continue on an upward trajectory in line with the economic fundamentals in the region.