HONG KONG (31 May 2021) – Asia Pacific’s key real estate markets are likely to witness a sustainable and resilient recovery in the next three years, bouncing back from a recent weakness triggered by the spread of COVID-19, according to the inaugural Urban Land Institute (ULI) Real Estate Economic Forecast report for the region.

China is forecast to lead the pack with 8.75% of real GDP growth in 2021, followed by Singapore (6.1%), Hong Kong (4.7%), and Japan (3.0%). While economies in the region are expected to grow at a slightly slower pace in 2022 and 2023, signs of continuing recovery remain as unemployment rates are expected to continue trending downwards across the four key markets surveyed, which focused on Hong Kong, Shanghai, Singapore and Tokyo.

Against this upbeat backdrop, real estate in the four cities is likely to experience a rebound as well, with bright spots in the office and logistics spaces. Although office vacancy rates are expected to expand at a slightly slower rate for the next three years, according to an office MSCI index, Singapore’s and Tokyo’s office sectors are estimated to return 3.59% and 3.1% respectively before accelerating to 8.63% and 4.3%. A rapid shift towards e-commerce also continues to support demand for logistics assets, with rental rates estimated to grow 2.75% in Hong Kong in 2022, the highest of the four key markets surveyed. The outlook for the retail sector remains downbeat this year, with rental rates projected to decline in Singapore and Shanghai as well as Hong Kong.

At the onset of the pandemic in 2020, substantial declines were seen in the inflation rates of the four markets studied, with Hong Kong and Japan dipping into negative territory. These are set to be reversed in 2021. Overall, medium-term inflation rates are projected to remain stable and subdued, rising very gradually from 2.0%, 1.55%, 1.4% and 0.0% in 2021 to 2.05%, 2.5%, 2.0% and 0.55% in 2023 in Hong Kong, China, Singapore and Japan respectively.

David Faulkner, president of ULI Asia Pacific, said: “The latest ULI Real Estate Economic Forecast paints a bright outlook for the key economies and real estate markets in Asia Pacific, signalling the region’s resilience to the challenges posed by the pandemic. Even so, pockets of uncertainties remain as recovery would depend on the pace of the reopening of the global economy, as well as the re-emergence of the virus which may lead to another round of lockdowns.”

The ULI Real Estate Economic Forecast’s findings are based on a survey of economists and analysts at eight leading real estate and investment organisations, Aberdeen Standard Investments, AEW, Cushman & Wakefield, Heitman, JLL, Morgan Stanley, Nuveen Real Estate, and Phoenix Property Investors. It is also based on historic data provided by JLL, MSCI and Oxford Economics. The report takes a deep dive into the three-year forecast for key economic and real estate data points for Asia Pacific’s four major markets, Hong Kong, Singapore, China, and Japan.

Other projections from the forecast include:

• Hong Kong: Office rental rates are projected to slide 8% this year, before finally returning to growth territory in 2023. The availability of logistics assets in the city remains low, driving rental rates upwards to record an expected 2.75% increase in 2022 and a 2.25% jump in 2023. Similar to other major cities in the region, rental rates for retail assets are estimated to decline by 10% this year, the steepest in the four markets surveyed, and will likely only bounce back in 2023.
• Shanghai: Despite declines seen in the likes of Hong Kong and Singapore, Shanghai’s office vacancy rate is expected to grow steadily for the next three years, in line with the increase in rental rates. The city’s logistics market is forecasted to remain resilient throughout the year as well, with rental rates recording a healthy increase of 1.75%, 2.25% and 2.75% in 2021, 2022 and 2023 respectively.
• Singapore: The growth in the office vacancy rate is expected to decline slightly between 2021 and 2023, with office rental rates recovering from 2022 onwards. The logistics space remains popular, with fewer assets estimated to be available throughout these years, driving rental rates upwards from 2022 onwards. Retail assets continue to face challenges, with rental rates expected to decline 7% this year before recording a slight recovery to a 1.75% increase in 2022 and a 4.8% jump in 2023.
• Tokyo: The office vacancy rate is expected to hit a high of 3.75% in 2023, from a low of 0.57% in 2019. Rental rates will stay weak with a 5.9% decline in 2021 and a flat growth in 2022. The rental rate for logistics assets will likely remain steady this year and the next, before slowing down slightly in 2023.

ENDS

About the Urban Land Institute

The Urban Land Institute is a non-profit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has over 45,000 members worldwide representing all aspects of land use and development disciplines. For more information, please visit uli.org or follow us on Twitter, Facebook, LinkedIn, and Instagram. ULI has more than 2,500 members in the Asia Pacific region. For more information on ULI Asia Pacific, visit asia.uli.org or follow us on Twitter, Facebook, LinkedIn and Instagram.

For further information please contact:

• Cheuk Fung Ng at [email protected], or
• Zita Setiawan at [email protected].