Asian Market Outlook – August 2025 (B&I Capital)
Macro Overview
- Favorable backdrop for Asian REITs as inflation cools in Asia ex-Japan and peaks in Japan.
- Weak US labor data and tariff induced economic instability signal potential Fed easing.
- Stable to declining inflation across Asia supports RE demand, with high occupancy and rising rents in most sectors.
- Asian RE securities may act as equity safe havens in a weak USD environment.
Japan
- BOJ closer to rate hike amid elevated inflation assessments.
- JREITs have aggressively sold less competitive assets to fund unit buybacks, maintaining performance despite rate concerns.
- Rent growth offsets interest expense; preference remains for Office, Hotel, Diversified, and Logistics REITs.
- Construction cost increases and regulatory tightening (e.g., Chiyoda ward) may dampen Developer sentiment.
- Large developers’ Q1 results are expected strong, but short-term catalysts are limited.
Australia
- RBA held rates steady, but recent trimmed mean inflation suggests easing is likely.
- FY2025 earnings should meet/exceed guidance, though FY2026 guidance may be conservative due to slower rate cuts.
- Goodman Group may underdeliver on guidance due to slow JV/tenant signings for data centers.
- Office market shows recovery, with peaking vacancy/incentives—positive for names like Charter Hall, Dexus, and Mirvac.
Hong Kong
- Positive momentum across sectors: Lower HIBOR supports funding, stock market and IPO activity improving, which has historically led to increase in office space demand.
- Luxury retail leads sales growth; residential sector benefits from easing buyer restrictions.
- Proposal for a “Property Purchase Capital Connect” could boost demand by 45k units.
- Preference for Retail REITs (e.g., Link REIT, Fortune REIT) and HK Land for its capital return focus and NAV narrowing strategy.
Singapore
- Continued capital raises (e.g., CICT’s USD 500m for CapitaSpring) reflect proactive acquisition strategies.
- Falling inflation (<1%) supports lower refinancing costs and likely boosts equity demand for REITs.
- Sector fundamentals remain strong despite some selling pressure to fund capital raises to create opportunities.
- Centurion is marketing a new REIT backed by worker dormitory and student accommodation, likely to draw strong interest.
