In China, rents declined in Shenzhen and Guangzhou (-2.1%) and increased in Beijing (0.9%) and Shanghai (0.2%). Although the phase one US/China trade deal has provided a short-term boost to the economy, abundant new supply is undermining rental growth in major Chinese cities. In Japan, both Tokyo (7.9%) and Osaka (1.9%) saw positive rental growth as the tax rate was amended following the Consumption Tax hike in October 2019. Hong Kong remained the most expensive prime office market in the region but is now entering a downward cycle.

The regional prime retail rental markets ranged from -21.3% (Hong Kong) to +10.3% (Seoul). Prolonged social unrest in Hong Kong deterred tourists in the second half of 2019, with retail sales shrinking by 20% YoY in 2H/2019. Seoul prime retail assets performed well because of increased consumption growth with consumer confidence hitting a seven-month high in November. In Vietnam, Ho Chi Minh City saw a robust rental growth rate of 8.9% while Hanoi posted a 0.5% growth as tourist arrivals and retail sales surged. The increase in the minimum wage of over 5% approved by the government in November 2019 will support private consumption in 2020.

Luxury apartment rental markets presented a mixed picture over the second half. Hong Kong recorded a rental decline of 2.3% but remained the most expensive city in the region in which to rent a luxury apartment. In Japan, rents in Osaka dropped by 2.4%, while in Tokyo they rose modestly by 0.1%. However, the outlook is positive due to ultra-low interest rates and low unemployment. In Manila, rents rose by 3.8% given stable macroeconomic fundamentals and sustained demand from affluent Filipinos, foreign investors, and expatriates. For other markets, Kuala Lumpur (-1.7%), Singapore (-0.5%), and Taipei (-1.8%) all recorded negative growth.

The hotel sector posted a moderate performance in most Asian markets. Hanoi (+13.8%) enjoyed a booming hotel sector as the number of inbound tourists to Vietnam reached an all-time high of 18 million in 2019, up 24.4% YoY. In China, Guangzhou (-9.0%), Shanghai (-4.0%) and Shenzhen (-2.7%) all saw a negative rental adjustment. Tokyo (+8.8) continued to enjoy a tourism boom due to the positive spillover effect from the 2020 Olympics, and remained the top hotel market in the region, with average rates of US$795.4 per room per night.