In China, negative rental growth was seen in Shenzhen (-3.0%), Beijing (-1.4%) and Guangzhou (-0.4), with the exception of Shanghai (0.1%). The sluggish GDP growth of 6.2% in Q2/2019, the trade war and ongoing deleveraging by the central government will continue to put downward pressure on the office sector. In Ho Chi Minh City, investor appetite was strong because of its healthy domestic office market demand and low vacancy of less than 2%. Hong Kong remained the most expensive prime office market in the region.

The regional prime retail rental markets ranged from -2.4% (Singapore) to +7.7% (Sydney). Although Australian retail sales dropped by 1.1% in Q1/2019, Sydney prime retail assets performed well over 1H/2019. Elsewhere, retail rents in Singapore are likely to remain muted as tourism receipts and local spending remain depressed. The economy only grew marginally by 0.1% YoY in Q2/2019, while its retail sales index dropped by -4.7% in Q2. The outlook has since clouded as Singapore GDP growth forecast for 2019 has been ‘downgraded’ by the Ministry of Trade and Industry to ‘0% to 1%’. For Hong Kong (+1.3%), the completed bridge and rail infrastructure brought a steady stream of same day Chinese visitors (+19.9%), however, this was not reflected directly in the retail sector given the weakening of the RMB and continued US-China trade tensions. 

Luxury apartment rental markets presented a mixed picture over the first half. Hong Kong achieved steady growth (+2.1%) and remained the most expensive city in the region in which to rent a luxury apartment. Demand soared in Tokyo (+2.3%) and Osaka (+2.0%) as Japan’s economy continues to grow steadily. Strong growth in US dollar terms was noted because of the appreciation of the Japanese Yen. In Shanghai (+2.7%), the opening-up of the local financial sector provided a strong source of luxury leasing demand, but there has been a slowdown in the automobile sector and from American expats. Outside China, Kuala Lumpur (-2.5%), Seoul (-2.4%), and Taipei (-1.7%) all recorded negative growth.

The hotel sector posted a moderate performance in most Asian cities, particularly in Manila (+14.4%), Hanoi (+10.0%), Tokyo (+6.7%) and Seoul (+4.8). The booming casino business in the Philippines is boosting tourism and total visitor arrivals increased by 15.62% YoY to 621,719 in May 2019, with Korea, China and the USA as the country’s biggest source markets for visitors. Vietnam also recorded robust tourism growth with the number of international visitors increasing by 7.5% YoY, hitting 8.5 million in 1H/2019. Tokyo remained the top hotel market in the region, with average rates of US$722.3 per room per night.