Asia Pacific leasing and investment demand come under pressure as headwinds strengthen
Commercial real estate transaction volume in Asia Pacific fell by 33 percent quarter-over-quarter to $23 billion in third quarter 2018 as investors in China and Hong Kong shifted into wait-and-see mode, according to CBRE.
Year-to-date transaction volume also declined, falling by 7 percent year-over-year to $85 billion. Active markets included Australia, with Sydney and Brisbane seeing the completion of several major deals, and Korea, where local conglomerates continued to dispose of office properties. Total cross-border investment volume registered $4.5 billion, representing 19 percent of total investment turnover, well below the previous four quarters’ average of 27 percent.
Office leasing activity slowed, with net absorption falling 4 percent quarter-over-quarter to 14.5 million square feet, mainly due to weaker leasing activity in Beijing and Shanghai. Demand continued to be led by the finance, TMT and coworking sectors. Vacancy remained flat at 11.1 percent. Rental growth picked up to 1.4 percent quarter-over-quarter or 4.1 percent year-to-date, driven by limited availability and relatively healthy demand in Guangzhou, Singapore and the Pacific.
The regional retail market remained stable, with major markets including Hong Kong, Japan and Korea reporting improving sales growth. Leasing demand was led by F&B and experiential trades. New retail supply stood at just 8.3 million square feet as project delays continued. Rents rose by 0.5 percent quarter-over-quarter, driven by growth in Auckland (+3.3 percent quarter-over-quarter) and Sydney (+2.1 percent quarter-over-quarter).
Logistics demand was unaffected by trade conflict and other economic headwinds as warehouse leasing activity continued to be supported by steady domestic consumption. Vacancy was largely unchanged while new supply remained steady, standing at 20 million square feet for the quarter. After outperforming in first half 2018, logistics rents saw stable growth in third quarter 2018, rising by 0.6 percent quarter-over-quarter, led by Melbourne and Shenzhen.
