Savills Prospects — March 2024: Tourism Close to Full Recovery, APAC Investors Drive Cross-border Transactions, and Remote Working Remains Remote
Savills Prospects surveys current Asia Pacific sector trends and demographic shifts that could have an impact on investors right now and into the future.
Asia’s tourism on the brink of full recovery
Asia Pacific was the last region to re-open following the pandemic. However, tourism is set to recover fully to pre-pandemic levels in 2024. As a result, the region’s hospitality and retail sectors are booming. The region recouped 65% of its pre-2020 arrivals last year, compared to 88% in the rest of the world. Chinese travellers are expected to remain absent until 2025, but APAC real estate is benefitting nonetheless. Investors in the region now are looking towards future growth.
Japan has been the fastest market to regain its tourism economy. Tourist arrivals in Q4/2023 surpassed previous peaks. The relatively weak Yen is encouraging rising tourist spend and ADR is rising too. The underserved up-market hotel, resort and ryokan sector is poised for growth. The casino project in Osaka, and luxury retailing are broadening the country’s offerings.
In Southeast Asia and Australia, arrival numbers remain off pre-2020 levels, but ADR is up. SEA locations on international radar are attracting investment, and China is actively trying to boost subdued inbound tourist numbers with select visa waivers.
Asian investors are driving cross-border real estate deals
APAC investors led the globe in cross-border real estate transactions in 2023. Asian investors led by Hong Kong, Japan and Singapore spent US$48.1 billion on overseas assets.
As US and European investors retreated, Asia’s expanded. APAC investors deployed capital in markets where competition from domestic investors had previously been significant. The US and Canada received almost US$20 billion in investment. Singapore investors spent 40 times per capita what US investors did. Japanese exposure overseas increased 170% over the year before.
Industrial and retail assets were the most in-demand worldwide. Office investment remains in flux, thanks in part to rising levels of hybrid working models. However, prime assets in major gateway cities continue to draw attention.
Asia Pacific embraces hybrid working, but homeworking remains rare
Remote working models have disrupted office sectors globally. Markets in the and the UK have accepted fully remote working by staff, 33% and 28%, respectively. Cities such as Sydney (80%), Singapore (49%), and locations in Japan (62%) have widely adopted hybrid models.
However, in South Korea, Vietnam (both 95%), China (94%), Hong Kong (79%) and Taiwan (74%) offices still dominate.
Work culture across the region is as diverse as APAC itself. Average home sizes, commute times and tech infrastructure play a part too. While hybrid working appears to be here for the long term, landlords and occupiers are adapting to worker demands. Office spaces now need to offer better amenities to appeal to staff. Additionally, hybrid working varies by industry, with the tech sector more flexible than banking. Demand for remote working is still low, which is ultimately positive for APAC office markets.
Author: Simon Smith
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