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Asia Pacific growth outlook and demand drivers

by Jennifer Molloy

The growth outlook for the Asia Pacific region should remain healthy and lead global growth — but is dependent on what happens in China — according to M&G Real Estate’s latest Asia Pacific Outlook.

China, which is responsible for nearly half the region’s economic output, is relying on infrastructure investment and an uptick in industrial production for the country’s growth to stay in the mid-6 percent range this year, and low-6 percent range for 2018, notes the report. The pace of debt-level increases is still rising, but more slowly, with nonfinancial corporate debt at roughly 140 percent of GDP.

“As part of China’s managed slowdown of its economy, the government is likely to carefully control credit tightening, with selective credit allocation to key industries while avoiding triggering unrest,” states the outlook.

Within the Asia Pacific region, demand drivers for office assets will include domestic corporations, tech-related industries, business services and other occupiers requiring high-quality amenities, according to the report. In the retail sector, suburban malls are likely to remain relatively resilient, with the trend toward e-commerce compelling a rise in food and beverage, as well as experience-based, retail. Retailers continue to seek established, prime locations. And in the logistics sector, e-commerce is expected to keep driving growing demand from third-party logistics providers, with an aging population relying more and more on delivery services. In addition, labor cost should be reduced by warehouse automation.

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