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Hong Kong’s investment momentum turned sluggish in 2020, with the total Hong Kong’s investment momentum turned sluggish in 2020, with the total transaction volume dropping 47%YOY to HKD 60.1 billion (USD 7.7 billion), a record low over the last decade.

Most investors have been taking a wait-and-see approach throughout 2020, given the market was still shadowed by different layers of uncertainty. Meanwhile, the global outbreak of the COVID-19 pandemic and the subsequent travel restrictions also likely deterred some site visits and investment decisions, especially for those investors with decision-makers abroad, making local and mainland capital the key buyers.

Whilst the property market in Hong Kong has been undergoing a correction across most commercial sectors, the gradual increase in yields in the last two years prompted investors to look for distressed assets or properties with bigger discounts, despite their limited availability. The bid-ask dislocation remained the key hurdle for investment transactions over the last 12months. 

China Real Estate Market 2021 – Finding The Way Forward

2020 has been a challenging year for all. With China now seemingly on its way to a full recovery, Savills has published its China market overview and outlook “Finding a way Forward, 2021”, which analyses key drivers and trends of five asset classes and the property management sector. 

投資： National transaction volumes decreased YoY, while niche assets increased their share of investments to all-time highs. 

オフィス： Occupiers look to optimise their office portfolios through flexible space arrangements while also securing cost savings. 

小売り： Landlords increase the share of leisure tenants in malls to attract consumers back to the high-street. 

Residential: Upgrade and end-user demand supports the stable market foundations, while the multi-family sector sees new regulations to protect tenant rights. 

Logistics: New infrastructure initiatives will level up warehouse standards and scale. Transparency and asset liquidity is also expected to improve with the launch of REITs. 

Property management: New IPOs saw a record high in 2020, while PropTech opens the way for additional value-added services.

With the acceleration of digitalisation as well as changing consumer behaviour, it is imperative for retail tenants and landlords alike to adapt to the rapidly-evolving multiplatform retail scene to remain relevant, retaining the physical shopper catchment in shopping malls through an online presence. Malls should no longer purely be just a point of sale, but also extend towards being a focal point that incorporates meaningful and memorable experiences that are able to resonate with the varying consumer needs. This would make for an in-store shopping environment that is more enjoyable and appealing than just traditional brick-and-mortar shopping or mere e-commerce, as part of their placemaking strategy.

With Singapore in Phase Three of Re-Opening, increased footfall to retail spaces is expected with the relaxation of measures for gatherings and a majority of the workforce back to the workplace.

The recent slowdown in rental declines of prime retail spaces point to a potential bottoming out of rents by early 2021, and any rental reduction during the year is projected to be about 5%, barring lockdowns as a result of recurring community infections. Rentals of prime retail spaces located in Orchard might require a bit more time to recover and are expected to only return to pre-COVID-19 levels once mass vaccinations prove successful enough for the nation as well other key cities to relax travel restrictions.

Most property markets in the Asia Pacific region ended a challenging year on the path to recovery, thanks to strong performances by the office, industrial and logistics segments. In China, a combination of government policies and the ongoing e-commerce boom powered demand for business parks and warehouses. Hong Kong saw a jump in transactions after the government reduced stamp duty on the sale of commercial properties, while Singapore saw a surge in investment sales amid improving sentiment. The market outlook improved in Australia as the country bounced back quickly from a recession, while New Zealand continued to reap the benefits of its successful management of COVID-19. Vietnam, which also has managed to control the spread of COVID-19 and perform better than other Southeast Asian economies in 2020, is attracting the attention of a growing number of local and foreign investors, especially in the industrial and logistics sectors. Japan is another market where logistics assets are highly sought after, reflecting growing demand from the e-commerce sector. In Indonesia, the hard-hit hospitality sector saw a surge in interest from investors looking to acquire discounted hotel assets, while fast-growing Myanmar continued to draw interest in the logistics and affordable housing segments. The residential segment is also seen trending up in the Philippines, where remittances from overseas workers is driving demand. Overall, investors are expected to act quickly to make the most of a conducive environment as markets across the region emerge from lockdowns and economies regain momentum.

Largely muted cap rates across Asia Pacific.

Uncertainty surrounding COVID-19 continued to put potential transaction activity on standby mode in Q42020. We saw largely muted cap rate fluctuations across the region.

Key Highlights in Q4 2020:

• で インド, notable exceptions included dips in industrial cap rates as the region-wide proliferation of e-commerce for both F&B and retailing generates sustained demand for warehousing and logistics facilities.
  
• ムンバイ’s retail cap rates edged upward as drops in rental and vacancies exert downward pressure on asset values.
  
• Elsewhere in マニラ, we witnessed a drop in rental values which are yet to be reflected on asset values.
  
• で オーストラリア’soffice sector, we expect modern assets with long term leases to continue showing resilience in value as investors focus more on low-risk buying opportunities.
  
• While the underlying appetite for office assets in Australia remains healthy, transaction volumes is temporarily being affected by international travel restrictions which has impeded upon site visits. Further, limitations brought about by the foreign investment approval process has posed uncertainties on inbound capital flows. However, recent inroads to policies have been made which appear optimistic.

Overall, we believe that varying expectations on economic outlook has translated into mismatch between buyers’ and sellers’ price expectations.

The gradual restoration of activity will drive capital back to office, retail and industrial sectors, in turn affecting their cap rates later in 2021.