Market Outlook

Office take-up in Southeast Asia accelerated over the last five quarters. In 1Q18 office take-up in the region grew by 6.8% year-on-year (yoy). Office demand is well correlated to Gross Domestic Product (GDP) growth in Southeast Asia and is expected to grow by 6% annually in 2018-2021.

Office demand was the strongest in…

Office take-up in Southeast Asia accelerated over the last five quarters. In 1Q18 office take-up in the region grew by 6.8% year-on-year (yoy). Office demand is well correlated to Gross Domestic Product (GDP) growth in Southeast Asia and is expected to grow by 6% annually in 2018-2021.

Office demand was the strongest in Singapore and Jakarta, where occupiers moved into new supply. Technology, e-commerce and flexible space operators were key demand drivers.

Flexible work space operators expanded by a compound annual growth rate (CAGR) of over 30% in the last three years in Asia Pacific and now take up 2.8% of the occupier office space in Singapore.

North Sydney now has two Premium grade office developments under construction. The first, 100 Mount Street (41,000 sqm), is due in early 2019, while 1 Denison Street (60,000 sqm) is due in late 2020. Both will benefit from the opening of the Victoria Cross metro station in 2024, above which Transport for NSW is currently seeking concept approval for a 168m, 60,000 sqm office building.

Real Estate Spotlight will go through:

A DIFFERENT PERSPECTIVE ON RETAIL INVESTMENT

Considering the difficulties facing the broader retail industry, we examine the industry in the context of private equity real estate transactions and show that, contrary to wider market trends, PERE retail activity continues to occur. Access the article to find out more on page 2

SOVEREIGN WEALTH FUNDS INVESTING IN REAL ESTATE…

Real Estate Spotlight will go through:

A DIFFERENT PERSPECTIVE ON RETAIL INVESTMENT

Considering the difficulties facing the broader retail industry, we examine the industry in the context of private equity real estate transactions and show that, contrary to wider market trends, PERE retail activity continues to occur. Access the article to find out more on page 2

SOVEREIGN WEALTH FUNDS INVESTING IN REAL ESTATE

The proportion of sovereign wealth funds investing in real estate currently stands at 62%, representing the second highest level of participation in alternative assets among this investor group, behind only infrastructure (64%). In this feature we take a look at how sovereign wealth funds invest in the asset class. Access the article to find out more on page 6.

The GPR/APREA AsiaPac Performance Snapshot tracks the dynamics of listed real estate securities (including REITs) across 12 AsiaPac countries/regions and eight sectors, over multiple time horizons.

• REITs posted the highest total return in May 2018. 
• Equities and listed real estate were the strongest performers over the past five years.
• On a ten-year basis, REITs outpaced rival asset classes, followed by listed real estate. 

Sharly higher rent growth herald a sea change from the soft market conditions of 2015-2017. We view the Singapore office market as the strongest income-growth opportunity within Asia for investors, with the potential to achieve up to 20% rental growth over 2018-19. Firm economic momentum, bolstered by synchronized growth across office-using sectors, should elevate prime office rents by 10% to 12% over 2018, and by 5%-7% over 2019.

As the market turns up and vacancy tightens, we recommend occupiers to bring forward impending lease reviews.

Office: Vacancy rate declined for the second consecutive quarter in 1Q18 on the back of the substantial improvement in net absorption as more tenants moved into their fitted-out premises in recently completed developments.

Access the article to find out more about SG’s Key Economic Indicators, Major Property Transactions, SG’s Offices as well as SG’s Residential and Retail performance!

The GPR/APREA AsiaPac Performance Snapshot tracks the dynamics of listed real estate securities (including REITs) across 12 AsiaPac countries/regions and eight sectors, over multiple time horizons.

• Listed real estate posted the highest total return in April 2018.
• Equities and REITs were the strongest performers over the past five years.
• On a ten-year basis, REITs outpaced rival asset classes, followed by listed real estate.

The soaring vacancy rates, which are in line with the continued completion of more new office buildings, have changed the recent “tenant market” situation. However, the overall 2017 market performance has indicated a sign of recovery, albeit moderately, with escalating enquiries for office expansion particularly from tenants exploiting the currently low rents. In 2018, Indonesia will move ahead with a 5.3% GDP projection, which will provide an interesting investment spot for overseas fund to come in, particularly in e-commerce and co-working business at least for the next two to three years.

Despite the Chinese New Year holiday, net absorption in the overall market still amounted to 160,900 sq ft in February on the back of relocation and consolidation requirements. Among the more notable new lettings, Kering pre-leased two whole floors (37,300 sq ft) at One Taikoo Place in Quarry Bay as part of their consolidation out of offices in Casuseway Bay, while RGA Reinsurance relocated within Swire Properties’ Island East portfolio, leasing 26,000 sq ft at Dorset House at accommodate expansion plans.

Click to find out more about the below:

• Labour market tightens further
• Grade A office vacancy rate continues to decline and stands at sub 3% for the fifth consecutive month
• Grade A rents continue moderate growth trend
• Tokyo Midtown Hibiya completes