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ASIA MARKET SNAPSHOT, Q 217

Q2 CAPITAL MARKETS & INVESTMENT SERVICES Q 217

 

Check the local markets prices in Vietnam here at our site: www.m2mrealeastate.vn

A REGIONAL VIEW

Global growth is strengthening, reflecting improving international trade, investment and manufacturing. In Asia China, Hong Kong, Singapore–and probably Japan and India—should all achieve stronger economic growth in 2017 than most observers predicted six to nine months ago.

In Q2 2017, the office sector has emerged as the strongest growth driver in most Asian countries, with several markets recording record-high transaction prices, particularly in Hong Kong and Singapore. However, investment activity in the retail, industrial, hotel and residential sectors has also been robust.

Hong Kong has affirmed itself as the most expensive commercial property market in Asia, with a number of record-breaking transactions and all-time high CBD rents. Land sales were also active with two record-high transactions for Murray Road carpark and Kai Tai commercial land. The hospitality sector has rebounded with a total of 9 hotels sold within the last 6 months. Coming into Q3, investors should look out for new opportunities in decentralised retail, industrial and hotel assets.

Singapore continued the momentum generated in Q1, with a total of USD7.5 billion in transactions including government land sales, reflecting a YOY increase of 19.6%. In the residential sector, a record total of four land parcels was sold within just one month with aggressive bidding. The commercial sector was just as buoyant with two major transactions and the upcoming sale of the Beach Road site also triggered under the Reserve List of the Government Land Sales (GLS) programme. 30+ Collective Sales processes and a few good land parcels are also under way for sale, reinforcing positive market sentiment around the Singapore office market.

Shanghai’s office sector continued to stay active through Q2, particularly for domestic investors who accounted for seven en-bloc transactions with a combined value of around USD2.4 billion, all being office or mixed-use assets . We expect the office market to remain dynamic in Q3, in CBD, DBD and business park locations. We expect the active buyers in Q3 to include RMB funds, local asset management companies, and foreign institutions that are capital-ready.

In Q2, India saw the long-awaited implementation of the Real Estate Regulatory Act (RERA) and the Goods and Services Tax reforms. With these in place, will the real estate prices go up across all sectors, especially residential? While stricter compliance rules and greater transparency are likely to impact new project prices, we expect little change for ongoing projects, due to substantial inventory overhang. Demand for commercial office and retail space continued to drive flows from institutional players. For the rest of the year we expect the warehousing sector to strengthen as an increased number of international players are looking to disrupt the largely disorganised logistics market. Other notable key trends we note across Asia:

The industrial and logistics sector saw increased activity as manufacturers, logistics companies and industrial office developers look for good long-term investment opportunities, particularly in countries such as Taiwan, India, Indonesia, Thailand and Philippines.

The tourism and hospitality sector is also gaining good momentum, particularly with increased visitor numbers and reinvigorated hotel transactions, particularly in Hong Kong. We also expect the land and hotel deals to grow further in Thailand and Vietnam.

Please feel free to contact our relevant investment market experts for an in-depth discussion on market trends and investment opportunities across the Asian region.
TERENCE TANG Managing Director Capital Markets & Investment Services I Asia

VIETNAM

Real estate deals in Vietnam were again dominated by off-market transactions this quarter, with limited advisory roles from the large agencies. The retail market was on alert with the impending opening of Vietnam’s first 7-Eleven by the team behind McDonalds. Ambitious expansion plans will further heat up demand due to limited availability of quality retail options in the market, which reflects Vietnam’s growth in popularity among operators, with its population of 94.5 million people, 60% being 35 or younger.

The market sentiment in Q2 is a continuation of Q1, with significant enquiries for well-located operational assets, particularly office buildings and hotels. The limited supply of high-quality assets is pushing capital values up and compressing yields– but this is mainly based on sentiment and expectation rather than clearly analysed open-market transactions. There is currently a mismatch between owners’ asking prices that are too high and yields on income-producing assets that are too low. Institutional investors will look to a more mature market for these yields or expect higher returns when investing here.

In Q3, we expect all sectors to perform well, especially the industrial sale & leaseback market and high-end hospitality assets.

The office market will lead the way with the recent boom in coworking space. Indochina Capital, a leader in Vietnam’s growing real estate, has recently partnered with the coworking operator, Toong, to develop new coworking space outlets. The overall positive sentiment is a reflection of Vietnamese real estate maturing, thanks to the entrepreneurial spirit of local developers and the growing maturity of the real estate market and occupiers’ expectations.

  • SECTOR TO WATCH Q3 2017 » Industrial » Hospitality
  • MAJOR MOVER Q2 2017 Hospitality

It’s been another solid quarter for the Vietnamese real estate market as Foreign Direct Investment (FDI) inflows continue their steady and strong increase in the country. FDI rose 10.4% YOY to USD12.1 billion. We expect the FDI volume to accelerate significantly in coming quarters, due to the government’s pledge to speed up the approval process of new investment projects. US President Donald Trump’s decision not to join the TransPacific Partnership (TPP) seems not to have impacted appetite from overseas investors.

ADAM FITZPATRICK Director +84 28 3827 5665 adam.fitzpatrick@colliers.com

BEIJING

Active investors, who are familiar with the local market, should still be able to find investment projects that can meet their requirements. In addition, domestic investors tend to be more active than their foreign counterparts. Beijing will likely continue to develop its decentralised areas Wangjing and Tongzhou. The government plans to gradually relocate some of its functions to a rising satellite city, Tongzhou, about 17km east of the nation’s capital. Many new infrastructure projects are also under construction, including future subway lines and the planned Daxing International Airport, located 46km south of the city centre, which will continue to drive development and improve the decentralised areas. Three major deals were completed in Q2, which demonstrates investors’ strong interest in value-add assets within decentralised areas. We expect this trend to continue in Q3. Major Deals to Highlight » China Resources purchased ZTE Tower (29,982 sq m) from the ZTE Corporation for RMB1.7 billion (USD250.7 million). The project is a value-add office building located in Haidian District, Beijing » China Ping An Trust acquired Beijing New City Mall (50,086 sq m) for RMB1.25 billion (USD184.4 million). This project is located in Wangjing, Beijing » An R&D building (34,364 sq m) in Zhongguancun Science Park, Shangdi, was sold to a local investor for RMB731 million (USD107.8 million)

  • EN-BLOC TRANSACTIONS 3 transactions
  • COMBINED VALUE USD542.9m
  • SECTOR TO WATCH Q3 2017 Value-add Assets  
  • MAJOR MOVER Q2 2017 Decentralised Office
  • BIGGEST DEAL USD250.7m ZTE Tower |

In Q2 2017, investors continued to focus on decentralised assets and adaptive re-use investment opportunities in the office, retail and business park sectors. As a first-tier city, Beijing is experiencing an overall property market bottleneck where new investment opportunities are relatively scarce. Nevertheless, we continue to see new transactions, especially in the decentralised markets.

LI JIE Managing Director +86 10 8518 1593 jie.li@colliers.com

 

HONG KONG

After the sale of the Murray Road site last quarter, we have seen a number of record-breaking transactions concluded in the office sector, namely the sale of 11/F of Worldwide House for USD78.2 million, or USD52,250 per sq m and 41/F of Lippo Centre Tower 1 for USD59.7 million, or USD52,926 per sq m.

Two major government commercial land sales were concluded on top of the government land sales. Murray Road carpark was sold at USD2,985 million or USD68,929 per sq m, setting a new record-breaking price per sq m for a commercial land sold in Hong Kong’s history. Whilst Murray Road was sold at a record price, Kai Tak commercial land also sold at USD3,150 million, equating to USD17,721 per sq m, marking a new record price for commercial land in Kowloon.

The office sector remained the most active with 8 en-bloc offices transacted in Q2 compared to only 4 en-bloc transactions completed during the same period last year. The positive sentiment should carry on well into Q3 as we now see more and more en-bloc properties for sale such as 7 floors of the Centrium, 60 Wyndham Street and Octa Tower in Kowloon East. The Excelsior Hotel is also available for sale, offering 63,174 sq m of potential office and retail redevelopment.

Hong Kong’s Chief Executive, Carrie Lam, is considering reviving the Revitalisation and Conversion of Industrial Buildings (RCIB) scheme, which should help with the redevelopment and wholesale conversion of older industrial stock. The value of older industrial properties would then potentially increase, but in any event, none of this will happen until the next CE addresses the subject again by Q1 2018. Property speculators would likely rush in and inflate the prices of industrial properties in the short term.

The local hospitality and tourism sector has seen a rebound in the last few quarters. The recent increased number of visitors has caught the investors’ attention: 9 hotels were sold in the last 6 months, marking an unprecedented number of hotel transactions in HK. Coming into Q3, investors show great confidence in future hotel developments, although most of the new hotels are 3-star only, and located in decentralised areas.

  • EN-BLOC TRANSACTIONS 26 transactions
  • COMBINED VALUE USD3,124m
  • SECTOR TO WATCH Q3 2017 » Industrial » Hospitality
  • MAJOR MOVER Q2 2017 Office
  • BIGGEST DEAL USD295m below 4% yield Newton Place Hotel

The Hong Kong investment market continued to be highly active in Q2 2017. The office market was once again the most dominant sector, with PRC developers securing the government’s residential land sales in the first two quarters. The primary residential market continued to be buoyant while the secondary market was mostly quiet. Decentralised retail, industrial and hotel properties have all seen some level of activity with increased transaction volume.

ANTONIO WU Deputy Managing Director +852 2822 0733 antonio.wu@colliers.com

 

THAILAND

The investment sector continues to grow, fuelled by new projects from large listed developers. For example, One Bangkok project on RAMA IV road is a mixed-use development on a 167,000 sq m plot, with an investment value of approximately USD3.5 billion.

Demand for Grade A and B offices continues to be robust in all CBD locations.

In the residential sector, the strongest demand came from very high-end condominiums situated in central locations, although we are starting to see signs of slowing growth rates in prime locations.

Tougher bank lending policies and high household debts continue to keep pressure upon the general market.

Demand in the industrial sector is improving on the Eastern Seaboard according to Thailand’s Eastern Economic Corridor (EEC), a program launched by the government.

We foresee a relatively positive market outlook for Q3, with the volume of Thailand’s exports rising and the tourism sector continuing to grow.

The general business outlook is also driven by low interest rates, low inflation rate and good progress in the bidding process of the mass transit and related infrastructure projects. We expect the transactions volume for land and hotel deals to increase in Bangkok and its surrounding areas in Q3.

  • SECTOR TO WATCH Q3 2017 Office
  • MAJOR MOVER Q2 2017 Office
  • BIGGEST DEAL USD4m Industrial Land in Bangplee IE | Land for industrial use

The market saw moderate growth in Q2, mostly led by better performing export and tourism sectors. The government’s commitment and spending on infrastructure have helped boost business confidence, particularly in relation to the new mass transit bidding process in Bangkok e.g. the Yellow, Orange, and Pink lines. Residential developers are encouraged by the prospect of improved transport links, although confidence is still fragile because of relatively high household debt. Large listed residential developers are still buying or leasing prime land for new mid-to high-end projects and acquiring new assets through mergers and acquisitions.

SUNCHAI KOOAKACHAI Deputy Managing Director +66 2 656 7000 sunchai.kooakachai@colliers.com
BARNY SWAINSON Director +66 2 656 7000 barny.swainson@colliers.com

 

Check the local markets prices in Vietnam here at our site: www.m2mrealeastate.vn

 

 

Sent by Colliers

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