The prime markets recorded rental movements from -4.8% (Jakarta) to +8.3% (Sydney). Investor appetite was strong for Sydney CBD office assets in 2018, with record high capital values and a low vacancy rate of less than 4%. Hong Kong continued to outperform other cities and remained as the most expensive prime office market in the region, with rents hitting nearly US$300 per sq m net pm, more than double its closest rival, Tokyo.

The regional prime retail rental markets ranged from -2.6% (Jakarta) to +15.3% (Melbourne). The Melbourne (+15.3%) and Sydney (+8.3%) retail markets grew dramatically because of the recent boom in Chinese tourist numbers. China (1.43 million) overtook New Zealand (1.39 million) for the first time to become the largest source of visitors in 2018. Chinese visitor spending increased 12% to $11.5 billion, accounting for 27% of total spend by international visitors and more than three times that of the next biggest market – the US. On the other hand, growth in the Hong Kong market flattened. Although visitor arrivals in 2018 were given a boost by the opening of the High-Speed Rail and the Hong Kong-Zhuhai-Macau Bridge, overnight visitor per-capita spending has only risen slightly.

Luxury apartment rental markets saw a mixed picture over the second half, with a robust performance in Seoul (+7.9%) and Beijing (+5.3%), and weak market sentiment in Manila (-4.0%), Shanghai (-2.1%) and Kuala Lumpur (-2.0%). Hong Kong saw steady growth of 2.1% and remained the most expensive city in the region to rent a luxury apartment. Some cities such as Shanghai and Singapore have moved to an early down-cycle.

In the hotel sector, a slowdown was recorded in most markets with the exception of Ho Chi Minh City (+16.4%), Tokyo (+13.4%), Singapore (+2.5%) and Shenzhen (+0.8%). The Vietnamese government plans to develop tourism and transport infrastructure and more relaxed visa policies allowing visitors from 46 countries to enter Vietnam has contributed to the tourism and hotel sectors in Ho Chi Minh City, with international visitors reaching 7.5 million in 2018, an increase of 17.38%. Tokyo remained the top hotel market in the region, with average room rates of US$707.8 per room per night. The upcoming Rugby World Cup and the Tokyo 2020 Summer Olympic Games are expected to attract more visitors to the Japanese capital.