Colliers International has reported that Asia's property sector has been driven by economic growth and low real interest rates. Higher trade flows and e-commerce will continue driving industrial and logistics property in China, Hong Kong, Singapore and India, with industrial property emerging as a key organised asset class across Asia.
Risks to this sector include a financial downturn affecting equity and bond markets, as well as reduced demand for leased central business district office space from large financial tenants due to faster-than-expected adoption of artificial intelligence and any subsequent workforce reduction programmes.
Forbes' ranking of the top 10 Asian cities for real estate investment in descending order are Singapore, Shanghai, Hong Kong, Beijing, Guangzhou, Ho Chi Minh City, Tokyo, Taipei, Jakarta and Kuala Lumpur.
Several trends are emerging in Asia, according to Urban Land Institute. Excess liquidity, where local sovereign and institutional funds are increasing their investment in property, is increasing the competition in assets. This in turn increases the competition in value-add space, shared workspaces and previously less focused asset classes such as data centres, affordable housing projects, build-to-rent (or co-living) facilities, and student and senior housing. Logistics assets remain the leading asset type due to Asia’s long-term structural undersupply.
Vietnam and India are top investment destinations due to expected high economic growth. China, the biggest source of regional property investment outflows, has experienced regulatory restrictions, particularly in Australia. Sydney and Melbourne continue to offer significant rental growth while Tokyo still offer high yields. Singapore, which had hit the bottom on office and residential sectors, has seen renewed investor interest and is currently south-east Asia’s hottest property market.
As for Asian retail property sector, some retailers are addressing e-commerce challenge and mall failure risk by changing the tenant mix and investing in neighbourhood retailing facilities. In capital markets, banks are also beginning to tighten lending requirements in some markets, particularly in Australia and China.
Asia Pacific Real Estate Association wrote that due to Asia’s 44% urbanisation and a growing middle class consumer powerhouse, the implications for Asia real assets remain positive. As long as the regional economy remains robust with workforce reduction programmes growing slowly, the Asia property sector will continue to perform well.
Lawrence Yeo is founder and principal consultant of AsiaBIZ Strategy, a Singapore-based management consulting firm providing Asia market research, business strategy development and export/FDI promotion services. US subsidiary is East West Enterprise LLC. Email: firstname.lastname@example.org