Outlook of Asia Pacific real estate by M&G Real Estate
Economic growth is expected to keep pace across the five developed Asia Pacific economies - Australia, Hong Kong, Japan, Singapore, Japan, as global trade recovery continues to gain momentum, although at a slower pace than in 2017.
*Office*
The office market in the key developed cities in Asia Pacific should benefit from business growth in the medium term, particularly from technology, finance and business services.
The Singapore prime office market is expected to outperform the region until 2020 because of a limited supply of Grade A office space in the CBD over the medium term and recovery of traditional, larger occupiers such as financial institutions and oil & gas companies.
*Retail*
The capital cities of the five developed Asia Pacific markets are expected to record continued income growth as global economic power continues to shift eastwards. This underscores expectations for household wealth growth over the next decade, providing high levels of disposable income to be spent on goods and services.
*Logistics*
Logistic take up is expected to remain robust as e-commerce continues to grow in the region. Demonstrative of this is parcel delivery, one of the fastest growing segments of the logistics industry, according to Colliers International.
Australia and Seoul are expected to be the best performing logistics markets in the region, with average total return of 8% to 12% a year over the next three years. A sustained population growth in the former would boost demand for logistics as consumption grows from a low base.
With new supply expected to taper from 2018, Singapore's logistics market is likely to recover by year end and grow an average of 1.6% a year over next three years.
*Risk*
While real estate investors remain motivated by stable income streams and diversification from other assets, high property prices and historically low yields in the region are creating caution among investors. This is further heightened by expectations of rising interest rates.
*Conclusion*
Among the sectors, logistics should provide the highest returns of 7% a year over the medium term, as higher yields compared to other sectors provide a wider buffer against rising interest rates.
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Based on the above analysis by M&G Real Estate, the beneficiaries are Ascendas REIT, Frasers Logistics & Industrial Trust, Frasers Commercial Trust, Capitaland Mall Trust, Mapletree Commercial Trust, Mapletree Industrial Trust and Mapletree Logistics Trust.
*Office*
The office market in the key developed cities in Asia Pacific should benefit from business growth in the medium term, particularly from technology, finance and business services.
The Singapore prime office market is expected to outperform the region until 2020 because of a limited supply of Grade A office space in the CBD over the medium term and recovery of traditional, larger occupiers such as financial institutions and oil & gas companies.
*Retail*
The capital cities of the five developed Asia Pacific markets are expected to record continued income growth as global economic power continues to shift eastwards. This underscores expectations for household wealth growth over the next decade, providing high levels of disposable income to be spent on goods and services.
*Logistics*
Logistic take up is expected to remain robust as e-commerce continues to grow in the region. Demonstrative of this is parcel delivery, one of the fastest growing segments of the logistics industry, according to Colliers International.
Australia and Seoul are expected to be the best performing logistics markets in the region, with average total return of 8% to 12% a year over the next three years. A sustained population growth in the former would boost demand for logistics as consumption grows from a low base.
With new supply expected to taper from 2018, Singapore's logistics market is likely to recover by year end and grow an average of 1.6% a year over next three years.
*Risk*
While real estate investors remain motivated by stable income streams and diversification from other assets, high property prices and historically low yields in the region are creating caution among investors. This is further heightened by expectations of rising interest rates.
*Conclusion*
Among the sectors, logistics should provide the highest returns of 7% a year over the medium term, as higher yields compared to other sectors provide a wider buffer against rising interest rates.
.......................
Based on the above analysis by M&G Real Estate, the beneficiaries are Ascendas REIT, Frasers Logistics & Industrial Trust, Frasers Commercial Trust, Capitaland Mall Trust, Mapletree Commercial Trust, Mapletree Industrial Trust and Mapletree Logistics Trust.
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