China and India to dominate Asian real estate for 2016
The outlook for real estate in the Asia Pacific region remains largely positive heading into 2016, according to Colliers International‘s 2016 Property Outlook. But pockets of weakness are starting to appear, according to the forecasts from Colliers International, while government policy continues to drive the behaviour of investors in many markets.
China is the proverbial “elephant in the room” for Asian real estate. That’s whether it is as a source of outbound capital or as an investment destination. Its economic slowdown and Beijing’s attempts to rebalance the domestic economy also spill over into its neighbors and trading partners.
“The focus remains firmly on China and the continued impact it has on all aspects of property activity,” Simon Lo, executive director, Asia research & advisory at Colliers international, says. “The dominance of China means that any changes to government policies in that country will continue to have ramifications throughout the whole region.”
Amid general caution and cost cutting among multinational finance companies, Chinese banks will continue to drive the office leasing in markets such as Hong Kong and Singapore in the year ahead. China’s outbound tourism is reshaping the hotel sector across Asia, rapidly becoming the No. 1 source of visitors to Japan.
India is cropping up on the radar for investors, in many cases for the first time. That is mainly as a result of its opening up of its domestic economy to international capital. Players active in India and China should see their cost of financing decline in 2016. In contrast, with U.S. interest rates set to increase, borrowing costs will be on the rise in Hong Kong and Singapore, although landlords should benefit from better yields.
India and China combined will account for around 70% of the huge impending supply of Grade A office space, Colliers predicts, with 100 million square feet already hitting the market in 2015 and 110 million square feet due for completion in 2016.
E-commerce is reshaping retail and industrial space around Asia. Logistics should be one of the most exciting spaces for investment, Colliers anticipates, as capital — once almost exclusively local — starts to cross borders in greater volume. Business-process outsourcing has put the Philippines on the map, resulting in large demand for purpose-built facilities there.
China represents a significant opportunity for retailers and mall operators, Colliers forecasts, since both global and Asian mid-market food & beverage operators are underrepresented there. This suggests China can build on the same kind of trends at play in Singapore, Hong Kong and Japan, where landlords are creating more “experiential retail,” built around wellness and lifestyle as well as a broader range of dining options.
For more results from Colliers International’s Asia Property Outlook 2016 report, please visit http://www.colliers.com/en-gb/asia/realestate2016.