Jul 12, 2012
by Cheryl Tay
New investment opportunities are arising out in the Asia Pacific region, despite slow growth and a challenging commercial property investment market, according to the Investment Strategy Annual (ISA) report by LaSalle Investment Management.
"The anticipated gradual improvement in economic data in the second half of the year will bode well for the property sector, with supply relatively tight and demand gradually picking up," said Paul Guest, Head of Research & Strategy, Asia Pacific at LaSalle.
He added that many central banks have eased their monetary policies, although "in some cases, this has not fully fed through to mortgage rates."
However, investment volume growth will likely be affected by fundraising challenges, volatile equity markets and tight lending conditions. Thus, investment activity in 1H2012 is expected to see only a gradual pickup.
The report added that Asia's commercial property markets have exceeded all previous peaks, accumulating the biggest run-up in rents and capital values after the Global Financial Crisis. Singapore and Hong Kong are currently experiencing rental decline.
"We see opportunities arising from this 'capital gap' across all property sectors, though of course the strategies will differ country by country. In addition, we remain favourable on hotels across the region, principally, but not exclusively, in the three- to four-star business hotel segment," added Guest.
LaSalle favours development in Korea "but repositioning in Australia and Japan, and stabilised assets, if they can be found, in Singapore and Hong Kong."
Asia Pacific is expected to have a steady economy as a result of monetary tightening, economic uncertainties and slower global growth.
Nonetheless, the region will likely move forward due to growing intra-regional trade, medium-term income growth and travel and investment flows.
In Singapore and Hong Kong, "continued competition for core has made prime prices sticky irrespective of a decline in rental income". Thus, both core office and retail are proving difficult to find at a suitable entry prices.
"Both markets should be monitored for attractive pricing in select Grade B office opportunities," added the report.
