Savills Research January, 2024: Asia Pacific Prime Benchmark Spotlight

Savills Research surveys the cost of occupancy in premium assets and market cycle positions across Asia Pacific as 2023 came to a close, and as 2024 begins in its latest research.

Savills examined the performance of assets in prime sectors in 21 markets across the region in 2H/2023 for its January 2024 Prime Benchmark report. Key centres including Singapore, Sydney and Tokyo, and emerging markets in Bengaluru, Jakarta and Delhi NCR were surveyed, creating benchmarks investors can refer to as 1H/2024 starts.

Prime Offices
Asia Pacific’s premium office markets are recovering at varied paces. As such, rental movements range from 5% decreases in Manila to 10.5% gains in Mumbai. Amid ongoing macroeconomic headwinds and market uncertainty, just nine of 21 markets recorded growth. Markets undersupplied with premium stock (Brisbane, Seoul) performed best, as did emerging markets (Kuala Lumpur and Ho Chi Minh City). Locations such as Guangzhou and Manila are challenged by high vacancy and oversupply. Finally, despite a 2.6% rental decline, Hong Kong is APAC’s priciest office market. Prime offices cost occupiers an average of US$194.10 per sq m per month.

Prime Retail Malls
Retail sales continued a slow recovery in 2H/2023 due to regional tourism recovery. Prime rental markets also edged towards recovery. Most markets reported mild rental growth or stability, due also to domestic consumption. Singapore’s prime malls posted 5.5% rental increases, Hong Kong 3.6% and Beijing 3.3%. Softening consumption and a tenant-dominated market led to a 4.2% decrease in Seoul. Moderating economic growth and lower consumer spending will weigh on rental recovery in 2024. Robust cross-border tourism, however, could offset some of the negative impact.

Logistics
The logistics sector remained APAC’s strongest performing asset in 2H/2023. Rents in modern facilities grew as high as 9.6% in Sydney, and fell just 1% in Hong Kong. However, waning e-commerce activity, slowing global trade and economic uncertainty could impact that momentum. Hong Kong remains the region’s most expensive logistics space, at US$23.10 per sq m per month, with Kuala Lumpur the most affordable at US$5.10.

Prime Residential
Luxury apartments, villas & townhouses and serviced apartments were relatively stable in 2H/2023. Hong Kong again recorded the highest costs in the sector, with apartments gaining 0.9% and homes gaining 10%. Villas and townhouses in Hong Kong are over twice as costly as second place Singapore: US$152.60 versus US$61.60 per sq m per month. Improving leasing sentiment also supported stability in Osaka and Guangzhou. Taipei recorded the strongest growth in the region, with demand underpinning a 7.2% increase in rents and 1.6% in serviced apartment rates.

Hotels
The premium hospitality sector continued its recovery in 2H/2023, and that momentum will carry into 2024. Nightly room rates climbed between 0.5% (Manila) and 53% (Hong Kong) in 2H/2023, like retail, thanks to regional tourism. Tokyo continues to lead APAC with nightly rates averaging US$898.40. While that figure represents a drop of 33.9%, it also represents rate normalisation following irregular highs.

For complete details, read the Asia Pacific January 2023 Prime Benchmark Spotlight report at Savills Research: http://sav.li/8s6