Asia Pacific Forecast Report - January 2017

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Solid growth persisted across the region despite a difficult macro environment over the past year. Counter-cyclical measures from governments and central banks also propped up domestic consumption and investment. Property markets in the 25 major cities that Cushman & Wakefield considers in the regional forecasts exercise have managed to fare well in 2016. Just as we had forecasted, new supply reached a new high-water mark in 2016, adding over 120 million square feet (msf) of prime stock in the region. As a result, vacancies edged up, while rents were hovering at record highs in most markets. From an investment perspective, we estimated real estate investment volume in the region would surpass the level in 2015; and we were right as it remains broadly on track. Commercial real estate investment activity held up even as an evolving political landscape across the world spurred uncertainty.

The year 2017 will inherit a healthy economy; hence, expect another year marked by continued strong occupier demand, healthy investor flows, and high transaction volume in Asia Pacific. In this report, we examine trends that will play a significant role in shaping the office market in 2017.

Key Takeaways:

  • Solid albeit moderating economic growth will underpin strong demand gains in most of the cities across Asia Pacific.
  • Surging demand for office space has been fueling a development boom, with prime completions expected to reach new highs through 2018, pushing up vacancies and easing rent increases in most of the region.
  • High rents will persist and even remain at record levels in 15 markets, occupiers will have increasing leverage as more than half of the markets will see vacancies rise to over 14% in 2017.
  • Landlords will have the upper hand in markets with single-digit vacancies and above-average rent growth: (core) Sydney, Melbourne, and Tokyo; (emerging) Bengaluru, Chennai, Hyderabad, Pune, and Bangkok.
  • Co-working space will continue to increase prominence in the region as more multinational corporations jump on the creative workspace bandwagon.
  • Favorable prospects in the region will continue to draw investor interest and ample capital will sustain an active investment marketplace, with cap rates holding steady or even firming up in a number of markets.

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