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Press release

29 OCT 2021

Demand for industrial assets aid Asia-Pacific commercial property recovery

RICS Commercial Property Monitor Q3 2021, Asia-Pacific  

  • Tenant demand rises across industrial yet remains negative across retail and office
  • Around one third of survey participants feel the market is still in the upturn stage of the property cycle, higher than this point last year
  • Climate risks seen as influencing investment decisions to some extent

The commercial property market in Asia-Pacific showed little change in Q3 2021 according to the latest RICS Global Commercial Property Monitor as industrial assets continue to lead the region’s recovery.

Across the region the Commercial Property Sentiment Index* – the weighted average of the demand and investor indices - came in at -10% (net balance) for the second consecutive report. The Occupier Sentiment Index** did improve slightly, pointing to a more stable picture ahead, with -12% reporting a decline instead of -17% in Q2. However, the Investor Sentiment Index*** slipped to -8% in Q3, down from -3% in Q2. Anecdotally, respondents link some of the subdued activity to the ongoing macro concerns linked to COVID related restrictions.

Breaking this down by sector, industrial property remains the key sector driving the region’s post pandemic recovery as it remains in demand as both occupier and investment enquires increased. Enquires for offices and retail are continuing to fall, but to a lesser degree than in previous quarters.

Looking more closely at investment and the future of the market, some parts of Asia-Pacific’s commercial property are set to offer strong investment returns over the next year. Looking beyond the main sectors, where industrial is set to offer the best returns, data centres, aged care facilities and multi-family will rise whilst at the other end of the scale secondary retail and hotels are set to struggle.

In an extra question to this survey, 57% of respondents report that investors consider climate risk when making decisions, albeit the majority only believe these risks are only quite important Across the board, the change in sentiment is likely down to new COVID restrictions as anecdotally, comments from respondents in China and Australia point to a more downbeat outlook whereas, in India, they point to a more optimistic outlook compared to previous quarters. 

As countries move out of lockdowns, almost one third of respondents in Asia-Pacific view the market to be in a upturn phase, which is up from the same point last year when 20% held this view. Looking at individual countries, in India, 60% believe the market to be in an upswing, but in China only a third of contributors believe this. In Malaysia, only one-fifth believe the market to be in an upswing and in Hong Kong, and Australia, respectively, around 40% believe it to be so.

RICS President, Clement Lau, commented: “The latest results highlight the impact COVID has had on market sentiment. Whilst there is little change across the wider region, the stories that are emerging demonstrate how influential this pandemic has been on our commercial property. However, there are positives: the headline indices are not at the levels that we saw last year, and the industrial sector continues to be in strong demand from both occupiers and investors. We see signs that investors are using this opportunity to respond to both the pandemic and emerging challenges like climate change and ensure they are in the strongest position when the economies start rebounding to the new norms in the years to come. Asia-Pacific is a diverse market and there is a wealth of opportunity to lead by example in addressing those emerging challenges - with innovative ways to reduce our carbon footprint, utilise technology and make our commercial property more sustainable.”

-ENDS-

 

Notes for editors:

 

* The Commercial Property Sentiment Index is an unweighted average of the OSI and ISI. (See below) Regional indicators are weighted using estimates of the stock of commercial property provided by LaSalle Investment Management and are adjusted on an annual basis.

 

**The RICS Occupier Sentiment Index (OSI) is constructed by taking an unweighted average of readings for three series relating to the occupier market measured on a net balance basis; occupier demand, the level of inducements and rent expectations.

 

*** The RICS Investment Sentiment Index (ISI) is constructed by taking an unweighted average of readings for three series relating to the investment market measured on a net balance basis; investment enquiries, capital value expectations and the supply of properties for sale.

 

About RICS

We are RICS. Everything we do is designed to effect positive change in the built and natural environments. Through our respected global standards, leading professional progression and our trusted data and insight, we promote and enforce the highest professional standards in the development and management of land, real estate, construction and infrastructure.

Our work with others provides a foundation for confident markets, pioneers better places to live and work and is a force for positive social impact.

For more information:

John Bayliss

jbayliss@rics.org

Alexandra Booth

abooth@rics.org

Rebecca Hunt

rhunt@rics.org

We are RICS

Everything we do is designed to effect positive change in the built and natural environments.

Through our respected global standards, leading professional progression and our trusted data and insight, we promote and enforce the highest professional standards in the development and management of land, real estate, construction and infrastructure.

Our work with others provides a foundation for confident markets, pioneers better places to live and work and is a force for positive social impact.

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