Savills Prospects August, 2023: Asia dominates luxury retail, LSRE gains traction in China, Seoul goes back to the office
As summer winds down Savills Prospects surveys the real estate landscape around Asia Pacific and pinpoints the trends poised to have an impact on investors in the coming months.
As Q4/2023 gets underway, Asia Pacific’s real estate investors are balancing core and alternative assets. Despite macroeconomic factors including rising interest rates and inflation prevailing, traditional sectors are proving resilient. Emerging asset classes, however, are also attracting attention. Savills Prospects highlights three key trends that will have a significant impact on investment in APAC in the near future.
Asia dominates luxury retail openings
The global luxury retail landscape continues to evolve. The Asia Pacific region accounted for 57% of new luxury store openings in 2022. As expected, the majority of those, 41%, were in China — but that figure represented a drop from 2021. China’s sluggish post-pandemic recovery and high youth unemployment has led to slower retail sales. While a full recovery is expected, Southeast Asian markets are showing strong growth potential; openings in SEA increased from 2021. Luxury retail in Singapore, Thailand and Vietnam is supported by rising HNWI populations and growing luxury profiles. Finally, there is good news for Hong Kong. Battered by falling tourist numbers since 2019, the city’s arrivals should return to pre-pandemic levels by 2024. That’s good news for its retail sector.
Healthy interest in China life sciences space
Life sciences real estate (LSRE) has gained traction worldwide in the wake of the pandemic. Structural factors such as demographics and an increased focus on health are underpinning investor interest. China is currently the world’s second largest pharmaceutical market, and spending on medicines is forecast to grow by US$30 billion in the next five years. The country’s ageing population and rising wealth are powering interest in lab and manufacturing space among investors. In addition, a highly educated workforce, strong hospital system, policy support and robust venture capital funding are developing LSRE clusters. LSRE is difficult to access, but cities are keen to attract the industry’s high value companies. Opportunities are there.
No WFH means Seoul offices are thriving
Remote and hybrid working models are retaining their appeal in North America and Europe in the wake of COVID. Workers in Europe currently spend one to 1.5 days working at home. In the US and Canada, workers want to be at home for half the week. Those trends are putting pressure on office markets in those locations. But in Seoul, Korean professionals’ preference for the office is buoying assets in its prime sector. Low vacancy rates and rents climbing 7.1% by June, 2023 have attracted overseas investors. The combination of Korea’s corporate culture and limited supply have the capital’s CBD, Yeoido and Gangnam districts booming.
Author: Simon Smith
Read the complete reports at Savills Prospects:
