The meteoric rise of flexible space in Asia Pacific

The rise of flexible space in Asia Pacific has been meteoric. JLL research indicates major operators grew their footprint at an annualized rate of 35% over the 2014-2017 period and that pace of growth has carried over into 2018 (Figure 1).

Figure 1: Flexible space stock*Source: JLL Research

A number of factors have driven the growth of this industry, and the co-working segment in particular, including the flexible terms offered to members, the plug and play ease of setting up, the sense of community and ready access to social and professional networks.

Initially co-working appealed to startups who found it more affordable than opening a traditional office.

To date the most popular flexible space model has been rent arbitrage.

But increasingly large corporates have started including co-working in their real estate strategy. And to accommodate corporates, operators have increased the size of their centres – our latest resea…

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Asian real estate and US interest rates

Economic conditions in the US continue along a path of steady improvement, with the latest GDP growth rate of 4.1% (annualized), signifying the strongest rate of growth in four years.

Robust economic growth teamed with strong employment data and upward pressure on inflation suggest the likelihood of further rate hikes over the course of the year.

US interest rate futures indicate traders are pricing in a 94% probability of a rate hike in September to 2.00%-2.25%, with a further 68% probability of an additional hike in December to 2.25%-2.50%.

Emerging markets currencies are becoming more volatile

Continued upward movements of US interest rates are starting to impact Asian real estate markets in a number of ways. With monetary policy positions in the Asia Pacific region sitting across a wide spectrum, the impact has been quite market specific.

Firstly, some of the emerging markets (EMs) are experiencing more volatility a…

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Self-storage industry in Asia on the rise

The self-storage industry in Asia is evolving as the notion of storing personal belongings outside the home catches on.

Outside of Japan and Australia, Hong Kong remains the most established Asian market with an estimated 418 facilities, a number that compares closely to China’s total facilities.

However, there is potential for further market growth.

Per capita stock of self-storage facilities in eight logistics markets in Asia (Hong Kong, China, Japan, Taiwan, Singapore, Malaysia, Philippines and Thailand) currently averages less than 0.01 sqm, significantly below the 0.1-0.2 sqm in the U.K. and Australia, and one sqm per capita in the U.S.

Self-storage operators have a potentially very viable product

The average occupancy rate in more established Asian markets as well as the U.S. stood above 80% during 2018, although China, Taiwan and Southeast Asia saw slightly lower levels.

Moreover, a good customer mix (on aver…

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First-home stimulus measure may have limited impact on Thailand’s housing market

The Thai government has released a housing stimulus measure which grants personal income tax allowance for buyers of first homes worth up to 5 million baht during April 30-December 31, 2019.

This measure will help reduce housing costs based on the personal income tax rate of each purchaser.

Although houses with the prices under 5 million baht are account for about 80% of the residential properties in the market today, EIC expects the benefits from this measure to be rather insignificant as

(1) the stimulus is limited to the first home buyers,

(2) the latest tax privilege being granted has lower degree and shorter runtime than the measures in the past,

(3) housing loans from financial institutions are becoming more strict especially with the new LTV criteria, and

(4) the household debt is still high while household income expands poorly. Nevertheless, residential developers may take this opportunity to o…

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Drivers of Asia Pacific office space demand in 2019 remain strong

Office occupational demand was robust across Asia Pacific in 2018, with overall leasing activity up an impressive 20% for the whole year.

Financial, professional services and tech firms stood out as key demand drivers, while flexible space operators are still a notable source of leasing.

Demand for office space remains healthy in 2019

Occupational demand remains healthy entering 2019, despite significant downside risks to the outlook – e.g. China-US trade war, no-deal Brexit, etc. Companies across the region continue to expand to varying degrees, according to the Manpower Group’s Employment Outlook Survey 1Q19.

More employers plan to increase rather than decrease staffing levels in most Asia Pacific countries, with employers in Japan reporting the strongest hiring intentions.

The outlook for the office occupational market in Asia Pacific continues to be bright and JLL holds the view that 2019’s gross leasing volumes will …

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Commercial real estate investment shows Value-add on the rise in Asia Pacific

For FY 2018, direct commercial real estate investment volume for Asia Pacific totalled USD 160 billion, increasing from FY 2017’s figure of USD 149 billion.

Out of this growing allocation of capital to real estate, a clear preference for value-add investment strategies has emerged.

Figure 1 shows that core, core-plus and opportunistic strategies have remained relatively unchanged in terms of their dry powder over the six years ending December 2018. 

Core and core-plus are characterised by lower risk and lower returns; generally Grade A office buildings in core locations of major cities, with diversified tenant mixes and stable occupancy rates.

Opportunistic, on the other hand, is higher risk and higher return, focusing on buildings that generally require significant enhancement or redevelopment.

Figure 1: Changes in dry powder by strategySource: Preqin, JLL

Value-add, however, characterised by medium-to-…

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Asia Pacific hotel investment outlook and trends 2019

The Asia Pacific region is expected to be the standout region from a growth standpoint, with hotel investment volumes forecasted to grow by 15% year-on-year in 2019.

Japan is expected to be one of the most active markets in 2019, with investor sentiment driven by the 2019 Rugby World Cup and the 2020 Tokyo Olympic Games. Investment momentum will continue to rise as investors explore selling hotel assets to capitalise on the tourism boom.

Singapore is currently riding the wave of a boom in hotel land sales which has reignited the interest of would-be sellers who are considering to sell their hotel properties.

In a tightly held market such as Singapore, we expect to see heightened sales activity as owners exit at record prices and newcomers seek long-term strategic opportunities.

With sustained demand in international visitor arrivals, robust trading performance, continued infrastructure development and political stability, Thailan…

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APAC Real Estate Outlook in 2019

As global real estate markets prepare for another year in an extended cycle, the appeal of Asia Pacific’s markets remains an enduring and driving force for the industry in 2019.

North America has long been the most popular destination for institutional investor capital, especially among American and Asian investors.

However, the progressive rise in U.S. interest rates – and the prospect of more to come – are deterring some investors from expanding rapidly in the country, prompting a potential reallocation of capital towards markets in Asia Pacific.

“Transaction volumes in the APAC region were up 20 percent year-on-year to Q3 2018, with full year volumes expected to set another record,” says Nick Wilson, Director of Asia Pacific Capital Markets Research. “The growth momentum will likely slow in 2019, but we still forecast an approximately 5 percent rise in overall transaction volumes.”

Hot countries

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Ballooning unsold inventory casts shadow on Thai Property Market

A total of 454,814 residential units across the country were left unsold last year, with a total value of US$ 41 billion, according to Sopon Pornchokchai, president of the Agency for Real Estate Affairs.

The supplies in the Bangkok Metropolitan Region constituted 40% of the total units available and 55% of the total value.

These supplies included detached houses, semi-detached hoses, townhouses, shophouses, condominiums (owner-occupied apartments) and residential land subdivision catered by formal private housing developers in Thailand.

In 2018, 448 housing projects were launched with a total number of units of 126,167 units with a total value of USD 17,267 billion in the Bangkok Metropolitan Region. This is consider a boom indeed.

Dr.Sopon Pornchokchai, President, the Agency for Real Estate Affairs Bangkok has the largest unsold supply

The largest unsold inventory were in Bangkok with a total number of units of …

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Scaling up in Asia Pacific’s logistics sector

Platform and entity level deals, capital partnering and joint ventures, and portfolio transactions are becoming increasingly common in Asia Pacific’s logistics sector.

The reasons why are simple – logistics sector fundamentals are strong, future growth prospects are positive, and accessing and getting scale in many markets across Asia Pacific are relatively difficult.

Investment sentiment in Asia Pacific is positive

Industrial transaction volumes in the first three quarters of 2018 (~USD 19.2 billion) are 29% higher than in the same 2017 period (~USD14.9 billion)[1]. Portfolio deals comprised an increasing number of these transactions.

In the first three quarters of 2017, there were an estimated 26 industrial sector portfolio deals[2]. This rose to an estimated 33 portfolio deals over the same period in 2018. Finalisation of Mapletree Logistics Trust’s acquisition of CWT International’s five Singa…

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