Prime Benchmark Highlights 

• Prime office rental markets in most cities remained in a down cycle in 2H/2021, with rental movements ranging from -8.4% (Delhi NCR) to 2.3% (Shanghai). Only Shanghai, Seoul, Beijing, Singapore and Taipei, five out of the 18 cities tracked, managed to report positive rental growth in 2H/2021. Efforts to revive regional economies were hindered by the delta variant in the latter half of last year and the effect was seen most clearly in Delhi NCR, where limited leasing activity in the prime office sub-market resulted in a sharp adjustment in rental levels. The Yen depreciated against the US Dollar by -10.4% through 2021, and it accelerated the decline in occupancy costs in US Dollar terms for prime office buildings in Tokyo and Osaka which recorded 15.2% and 13.8% decreases YoY respectively, while the decline in Yen terms was milder at -5.4% and -3.8% YoY.

• Prime retail markets have recovered slightly from previous disruptions and lockdowns, with rental movements ranging from -3.8% (Singapore) to 2.8% (Hanoi). Prime retail rents in Hong Kong rose by 2.2%, the first sign of growth since 2H/2019. While domestic consumption has played an important role in stabilising retail rental levels amid the pandemic, tourism remains the key swing factor for longer-term growth and full recovery. In this respect, the region lags in comparison to Europe and North America, where border restrictions have mostly been lifted and tourism is recovering steadily.  The outlook for retail rents in the region in 2022 will rely largely on the border restriction policies which governments adopt. 

• The logistics market has proved remarkably resilient during the pandemic and 2H/2021 was no exception, with demand for space heightened in response to the ongoing supply chain disruption. Rental movements ranged from 1.2% (Shanghai) to 7.3% (Kuala Lumpur). International trade, domestic consumption and online retail consumption have remained the most vital driving forces for logistics space in China, with Beijing (+2.2%), Shenzhen (+1.9%) and Guangzhou (+3.0%) continuing in an early upswing. Being the top performing sector in the Malaysian real estate market, thriving e-retailing and improvements to local supply chain infrastructure have boosted demand for Kuala Lumpur logistics. In Hong Kong, a rebound in the local trading and retail sectors drove up rents, which recorded a 3.6% increase. 

• Rental movements in the region’s luxury apartment rental markets were diverse in 2H/2021. Singapore saw the highest growth (+3.6%), mainly due to surging demand from expats and ultra-high net worth individuals, who are now allowed to travel to and from the country with vaccinated travel lanes and relaxed border restrictions. Beijing and Guangzhou, which recorded growth in 1H/2021 (+3.8% and +2.0%), retracted slightly in 2H/2021 (-0.3% and -0.5%) while in Taipei and Kuala Lumpur, rents dropped further by 2.5% and 2.9% respectively.  

• The hotel markets demonstrated a very mixed picture, with changes in room rates ranging from -23.5% (Ho Chi Minh City) to +20.2% (Kuala Lumpur). While there were more cities recording double digit growth in 2H/2021 mainly due to the lower base effect compared to 2H/2020 (Hong Kong: +14.1%, Taipei: +11.3%, Seoul: +13.7%, Beijing: +19.0%), it is worth noting that room rates in Tokyo and Osaka declined sharply (-11.4% and -13.8%) due to elevated infection rates attributable to the delta variant.  

 Note: All % changes are in local currency terms unless otherwise stated. 

The depreciation of the Yen against the US Dollar throughout 2021 accelerated the decline in occupancy costs in US Dollar terms for prime office buildings in Tokyo (-8.1%) and Osaka (-5.2%), which recorded 15.2% and 13.8% decreases YoY respectively.