Economic growth momentum continued to wane through the fourth quarter of 2011. Sluggish growth in developed economies, as well as threats of new financial chaos looming in Europe, continued to weaken the region’s manufacturing activity and dampen private spending and investments. Nonetheless, the Asia Pacific office market ended 2011 with a solid upturn in leasing activity. Rent growth was sustained in most markets and strengthening demand fueled flat to declining vacancies. In addition, investment volume for all property types was the highest globally for the third consecutive year. For 2012, Cushman & Wakefield expects softer office fundamentals, on the back of slow economic growth but no recession.
The growth momentum in Asia Pacific slowed in the third quarter as a result of continued uncertainty. Several countries lowered their GDP growth forecasts and most central banks in the region have in place tightening cycles on hold. Nevertheless, office fundamentals remained strong except for supply heavy markets. We expect a continued slowdown as we enter 2012 but the Asia Pacific region is well positioned to weather a challenging global economy.
Amid uncertainty and market volatility during the third quarter, office fundamentals continued to hold up generally in many markets within the region. The Grade A vacancy rate remained low, albeit slightly higher from mid-year. Rental rates continued their uptrend in most markets, and set another record in Beijing and Hong Kong. Meanwhile, rents in Tokyo dipped to their 10-year lows. While a protracted global slowdown could impact the region, Cushman & Wakefield expects overall economic and property fundamentals to remain intact for the remainder of the year.
We are pleased to present our inaugural edition of the Asia Pacific Office Forecasts. The report provides an in-depth outlook for the region whose fundamentals and potential are by far the strongest in the current global economic climate. While a downshift in exports to the West would still be felt, particularly for open small economies, the region as a whole has evolved to be more resilient. The regional office property market should similarly reflect this. The combination of growing economic clout, still-sturdy property market fundamentals and the abundance of capital will continue to position the Asia Pacific favorably in this period of economic uncertainty and thus remain a magnet of investor interest.
An evolution has been occurring within corporate real estate (CRE) that is now gaining undeniable momentum. CRE is being asked to play a prominent role in helping companies fulfill their corporate objectives and many CRE departments are transforming from the role of support function into business partner and business enabler. Consequently, today’s real estate executives struggle with balancing the appropriate amount of tactical and strategic expertise to have within their departments.
This report examines the new responsibilities being placed on today’s global real estate executives and suggests a five-step program to consider when undertaking the task of supporting the company with thoughtful and strategic solutions.
The share of global manufacturing output from developing countries has risen from 20% in 2000 to over 33% in 2011. China now accounts for a fifth of all global manufacturing.
However, China has witnessed soaring labour costs, taxes and land prices over the past few years, which are pushing companies to question China as a cost efficient location for manufacturing production.
That said, China’s high costs are generally offset by the availability of a reliable supply chain, high-quality infrastructure, sophisticated market and overall ease of business, particularly when compared to the conditions of other Asian markets.
The key for China is to move up the value chain of manufacturing. By doing so China will retain its competitive advantage within the Asian markets as well as sustaining its prominence as Asia’s manufacturing hub.
First quarter data confirmed that the regional slowdown we have been expecting is under way. However, some economies have showed considerable resilience and steady growth. Markets such as China and India continued to see buoyant performances amid a strong stream of supply. Inflationary pressures also retreated across the region, despite remaining high in some parts like Vietnam. C&W expects economic growth to moderate in the second half of 2012 with leasing activity still healthy while rents will be softening in places with abundant new supply such as Ho Chi Minh City and Kuala Lumpur.