Thought Leadership

• Tenant enquiries and site visits increased in the surveyed period, largely driven by the retail and industrial sector. Activity in mainland China continued to be constrained by strict pandemic-related measures.
• Demand for both traditional and flex office space cooled as many occupiers switched to wait-and-see mode amidst the dimmer economic outlook. The appetite from industrial sector also decreased as respondents saw more consolidations.
• While the outlook for rents in Korea, Singapore and Australia turns more positive in the surveyed period, lagging markets like mainland China also expected a slower rental decline.
• Regional leasing sentiment remained largely stable. Although mainland China was the weakest performer, a more positive outlook is expected along with recent relaxation of zero COVID policy. Landlord strength continued to decline as the market shifted further in favour of tenants.

This report was originally published in https://www.cbre.com/insights/briefs/asia-pacific-market-sentiment-survey-december-2022

In the first survey of its kind, CBRE polled more than 20,000 people worldwide – from Gen Z to Baby Boomers – earlier this year to understand how they will live, work and shop in the future, and how this will impact the real estate they use. Included in the survey were around 9,000 respondents from Asia Pacific.

The survey findings revealed fresh insights that can be harnessed to inform real estate occupier and investor strategies, and ensure that real estate is positioned to meet users’ evolving needs.

Key Asia Pacific findings include:

LIVE

• Strong desire to move: 32% want to move their home, with city centre areas most popular
• Robust homebuying sentiment: 66% of those planning to move homes want to buy instead of rent
• Shifting preferences for home selection: 66% say health and safety is a more important factor than price                  

WORK

• People want more flexibility: 85% currently spend at least three days per week working at the office
• Location is key: 75% are satisfied with their city centre offices; 55% who work in suburbs stated the same
• Workplace quality matters: 69% of office-based workers attach greater importance to workplace quality

SHOP

• Most consumers prefer to shop offline: 61% prefer to see products in-store before ordering online
• Outlook for personal finance is upbeat: 53% expect their financial situation to improve over the next year
• Ethical consumerism is growing: 80% are more aware of environmental & social issues when they shop

This report was originally published in https://www.cbre.com/insights/local-response/asia-pacific-live-work-shop-report-2022

KEY TAKE-AWAYS

• APAC countries continue to rank highly as locations of production, particularly due to the abundant supply of low cost of labour: of the top 12 locations, half are in APAC.
• Many of the countries that have slipped in the rankings compared with 2021 have done so due to increased costs (particularly for labour and electricity) and increased risk (economic, political and natural disaster); a number of these countries are in Europe where the war in Ukraine has had a significant impact on cost and risk factors.
• A wide range of countries have also experienced even greater constraints in the availability of labour as unemployment rates have continued to fall; this has affected countries across all geographic regions and states of economic development albeit key production locations in emerging APAC markets continue to benefit from expanding labour pools.
• A number of countries – particularly in Europe – have improved their ability to achieve sustainability targets, including efficient resources use and creating green economic opportunities, bolstering their longer term economic outlook and risk profile.
• U.S. companies are bringing jobs and supply chains home at a historic pace. American companies are on pace to reshore, or return to the U.S., nearly 350,000 jobs this year, according to a report published by the Reshoring Initiative.

READ THE FULL REPORT

Q3 2022 Investment Trends features in-depth and up to date insights on demand drivers and other key investment trends in Australia, mainland China, Hong Kong SAR, Taiwan, Japan, Korea, India, Singapore, and New Zealand.

Key Trends

• Faster-than-expected interest rate hikes hinder acquisitions
• Purchasing led by real estate funds and institutional buyers
• Significant decline in logistics and hotel transactions
• Retail deal flow picks up
• Cross-border deals continue to rise y-o-y
• Fund-raising remains solid
• Investment activity is expected to weaken further

This report was originally published in https://www.cbre.com/insights/figures/asia-pacific-investment-trends-q3-2022

Key Trends

• Leasing activity loses momentum
• Occupancy remains high
• 3PL and e-commerce drive demand
• Pacific markets underpin rental growth
• Investment interest stays firm
• Mild yield expansion in selected markets

This report was originally published in https://www.cbre.com/insights/figures/asia-pacific-industrial-and-logistics-trends-q3-2022

Key Trends

• Retail sales growth slows
• Inflation and recessionary fears weigh on consumption
• Leasing activity shows slight recovery
• Luxury brands turn more active
• Zero-covid impacts mainland China demand
• Retailers set to remain cautious

This report was originally published in https://www.cbre.com/insights/figures/asia-pacific-retail-trends-q3-2022

Key Trends

• Slower economic growth and inflationary pressure weigh on leasing activity
• Mainland China see mild recovery but other markets flat or weaker
• Finance, tech and coworking remain major demand drivers
• Rising construction and fit-out costs cause delays to new supply
• Flight to quality relocation still most popular strategy
• Occupiers set to remain cost cautious as economic worries mount

This report was originally published in https://www.cbre.com/insights/figures/asia-pacific-office-trends-q3-2022

• The Asia Pacific flexible office space market continued to display cautious growth in 2022, with the total volume of flexible office space in the region reaching 76 million sq. ft. as of September, an increase of 6% y-o-y on 2021 and 15% on pre-pandemic levels.
• As of September, flexible office space accounted for about 4% of total office stock and 3% of total Grade A office stock in Asia Pacific. In the Grade A segment, India and Singapore reported the highest penetration of flexible office space, while most North Asian markets are just below 2%.
• Tech firms and business services companies remain the top corporate users of flexible office space. Interest is also growing among financial, life science and consumer product firms.
• Trends that will continue to shape the flexible office landscape in 2023 include:

1. Flexible space operators offering on-demand memberships to cater to more dispersed workforces resulting from the widespread adoption of hybrid work
2. Growing occupier demand for customised enterprise and turnkey solutions to mitigate rising fit out costs and CapEx constraints
3. The use of asset-light strategies as flexible space operators form partnership with landlords using management contracts

This report was originally published in https://www.cbre.com/insights/briefs/h2-2022-asia-pacific-flexible-office-market-deliberate-growth-continues

Almost three years after the onset of the global pandemic, the retail industry has been through one the biggest stress tests imaginable, but best-in-class real estate has remained robust – and even emerged stronger in some markets.

Cushman & Wakefield’s flagship Main Streets Across the World report tracks the top retail districts across 92 cities and ranks the most expensive by prime rental value. An annual report until 2019, this year’s report is the first since then, allowing insight into comparative performance pre- and post-pandemic.

Rent Growth Highlights

• Rents across global prime retail destinations declined by 13% on average during the depth of the pandemic but have rebounded to just 6% below pre-pandemic levels.
• The Americas, thanks largely the to the U.S., was the most resilient region – on average rents now sit at a 15% premium to pre-pandemic levels.
• In Asia Pacific rents fell on average by 17%, impacted by international border closures, which curbed tourism in prime locations.

Global Rankings

• New York’s Upper Fifth Avenue moves up one spot to number one, now ranks as the most expensive retail destination in the world.
• Hong Kong has slipped to second place, with Tsim Sha Tsui overtaking Causeway Bay as the most expensive precinct in the city-state.
• Via Montenapoleone in Milan has jumped two positions to achieve third place, followed by London’s New Bond Street and The Avenues des Champs Elysees in Paris rounding out the top five.

This quarter, the Knight Frank Data Centre report focuses on the growth markets of Asia Pacific. Market analysis includes Osaka, Melbourne, Jakarta, Manila, Hanoi, Taipei, and Indian cities Hyderabad, New Delhi and Chennai.

The growth trajectory of data centre supply noted in the principal global data centre markets in previous quarters is now being mirrored in secondary cities across the region. Underpinned by strong demand fundamentals and a trend towards greater localisation of data centre facilities, total supply (live, under construction, and committed capacity) in the reported APAC markets has grown from just under 700MW five years ago to over 3,000MW today. For the first three quarters of 2022 alone, around 600MW of new capacity has been added.

Melbourne, Jakarta and Osaka now each have over half a gigawatt of aggregate IT Supply. At 593MW of registered IT supply, Melbourne is seeing renewed interest from local and regional operators such as NextDC, AirTrunk, Vantage and Stack Infrastructure, which will add close to 450MW to existing live supply. Microsoft is also known to be planning a facility here. Jakarta has seen significant announcements and planned capacity, several times the existing supply, from both hyperscale cloud service providers like Amazon and Microsoft, as well as a variety of local and international operators. Osaka continues to develop as an alternative data centre market in Japan complementing the more established Tokyo region.

The major cities of Hyderabad, New Delhi and Chennai are also registering rapid growth, with between 300MW to 400MW of IT capacity each. About two-thirds of this supply was added in the past couple of years, with around 50% of total supply planned or committed capacity. The increased investment in the data centre sector in recent years is party driven by government policy, including easier access to credit and other incentives to boost data centre investment. Active players in the market include local firms such as CtrlS, Sify Technologies, Nxtra by Airtel and Web Werks, joint ventures such as AdaniConnex and BAM Digital Realty, as well as cloud service providers.

In Southeast Asia, Taipei, Manila and Hanoi continue to see growing interest from hyperscale CSPs and data centre investors. AWS announced local zones in both Manila and Hanoi this year and is in the process of rolling them out, while the global firm also launched its local zone in Taipei in October 2022. Current key players in these markets mainly comprise the local telcos, with a handful of regional joint ventures such as STT-Globe in the Philippines and NTT-VNPT in Vietnam.

Overall, the expansion of data centre activity into the growth markets across the APAC region remain on a strong footing, reflecting the continued resilience of demand across each geography.

This report was originally published in https://app.dcbyte.com/knight-frank-data-centres-report/Q3-2022/