Research round-up: Hong Kong investment cools, Australia sets new record

Here is our round-up of recent research and trends from across Asia Pacific real estate:

JLL: Hong Kong office, high street values may fall up to 5% in H2 2019

The ongoing US-China trade war and uncertain global economic outlook will weigh on grade A office and high street prices and rents in the second half of 2019, says JLL.

Hong Kong grade A offices and high street shops were hit by signs of softening rents in the first half of 2019, leading to capital value falls of 0.6% and 3.8%, respectively, during the period.

“For the remainder of the year, it is hard to see how the current market situation will reverse and as such we believe capital values of Grade A office and high street shops will drop 0-5% while those of prime warehouse should outperform the market and grow 0-5% this year,” said Joseph Tsang, chairman and head of capital markets at JLL in Hong Kong.

Total commercial real estate investments in Hong Kong declined 51% to HK$53.3bn during H1 2019, as Chinese investors withdrew from the market because of tighter capital controls introduced by the PRC central government.

C&W: Australian commercial property investment hits A$43bn in FY19

Australian commercial real estate investment rose 22% year-on-year to a record A$42.6bn in the 2019 financial year, led by a bumper year in office deals, according to Cushman & Wakefield.

During the 12 months to end-June 2019, office investments climbed to a new high of A$23.1bn thanks to some major deals such as Dexus’ A$1.476bn Melbourne deal and Blackstone’s A$1.52bn Sydney acquisition.

“Investment in Australian commercial property remains in strong territory, with sustained investor demand for office assets across the country as rents ran higher and vacancies tightened,” said John Sears, head of research, Australia and New Zealand at Cushman & Wakefield.

“However, we are not yet calling the bottom of the yield cycle. Solid rental growth, improving funding costs plus the blowout in the spread to bonds suggests there is still room for commercial yields to decline further.”

CBRE: Investors cool on Chinese commercial property amid US-China trade war

Many investors have adopted a more selective approach to commercial real estate investment in China amid concerns over the impact of the US-China trade war on China’s economy and currency, says CBRE.

En-bloc property investment in China declined 18% year-on-year to RMB 98bn (US$14.2bn) during the first half of 2019.

Cross-border investors remained active during the period, facing lower competition for assets thanks to weaker sentiment among domestic investors.

CBRE noted that leasing risk was a growing concern and could lead to a wider price gap between buyers and sellers, with stability of income emerging as a key priority.

Colliers: Tech, new business models reshape Asian logistics

Technology and new business models are reshaping the logistics landscape across Asia Pacific, driven by the e-commerce sector which is under pressure to improve service and lower costs, says Colliers.

Stephanie Sun, director of research, Asia at Colliers, said businesses like Amazon and JD.com had simplified operations and eliminated significant labour costs associated with traditional logistics industry through AI, cloud solutions, warehouse automation and other innovations.

The firm said Asia logistics property investment remained attractive with yields ranging between 4.3% and 6.1% in Q1 2019. The sector is projected to perform well this year due to rising rents and capital values.

Investors should look to assets in emerging markets such as non-Tier 1 Chinese cities and cities near Seoul, as tradable logistics assets in mature markets like Tokyo, Hong Kong and Singapore remained scarce, the firm cautioned.

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