Prime Benchmark Highlights
- The prime office rental market presented a mixed picture in 2H/2022, with rental movements ranging from -7.3% (Jakarta) to 2.2% (Singapore and Brisbane). As more people return to the office and borders gradually reopen, half of the 21 cities recorded positive rental growth in local currency terms in 2H/2022, with Singapore (2.2%), Brisbane (2.2%) and Ho Chi Minh City (1.9%) registering the highest growth rates. Supply gluts and higher vacancy continued to put downward pressure on rents in some cities, particularly Jakarta (-7.3%) Delhi NCR (-6.9%), Hong Kong SAR (-3.6%) and several Mainland Chinese cities (ranging from -2.3% to -0.1%). In terms of occupancy costs in US dollars, since the US currency weakened against most currencies compared to 1H/2022, we saw stronger growth in occupancy costs for prime office buildings in Singapore (5.7%), Tokyo (3.2%) and Osaka (5.0%), while in local currency terms mild growth or a slight decline of 2.2%, -0.4% and 1.3% HoH respectively was noted.
- The prime retail rental market showed gradual signs of recovery in 2H/2022, with rental movement from -3.5% (Shenzhen) to 3.1% (Taipei). Since many cities have started to remove their social distancing rules and border controls, retail market conditions have picked up. Prime retail rents in most cities recorded mild rental growth or remained flat in 2H/2022, with Taipei (3.1%), Manila (2.8%) and Singapore (1.8%) registering the highest growth rates. However, rising inflation, interest rate hikes and an uncertain global macroeconomic environment may affect household disposable incomes and weigh on consumer confidence, resulting in softer retail sales. As a result, prime retail rental markets are expected to see a more gradual recovery in 2023.
- The prime logistics market remained resilient in 2H/2022, but more cities have moved from an early upswing into a late upswing as the pandemic-backed e-commerce demand faded and global trade momentum continued to moderate. Rental movement ranged from -6% (Guangzhou) to 18.9% (Sydney). The cities with a chronic shortage of stock and a limited pipeline of industrial and logistics properties, such as Sydney, Melbourne, Brisbane and Singapore, saw strong rental growth of 18.9%, 10.6%, 7.0% and 4.5% HoH respectively. In contrast, the cities with high levels of new supply, such as Guangzhou and Shanghai, posted declines of 6.0% and 2.0% HoH respectively.
- Luxury apartment rental movements were relatively diverse in 2H/2022, ranging from -3.6% (Guangzhou) to 15.8% (Singapore). Singapore recorded the highest rental growth of any city (15.8%) in 2H/2022, fueled by strong demand from the influx of expatriates and high-net-worth individuals from China, as well as a limited supply of luxury residential properties. Rents in Tokyo and Osaka also rebounded by 3.4% and 2.7%, while rents in Guangzhou (-3.6%), Shanghai (-0.7%), Shenzhen (-0.2%) and Hong Kong (-0.4%) continued to be impacted by lingering outbreaks and stringent border controls in most of 2H/2022.
- The hotel markets regained momentum in 2H/2022 amid the border reopenings. All cities were in an early upward cycle, except major Mainland Chinese cities, though we saw some green shoots in late 2H/2022 following the lifting of zero-COVID. Some popular tourist destinations saw a double-digit or even triple-digit room rate growth in 2H/2022, such as Tokyo (170%), Osaka (74.3%), Hanoi (53.1%) and Ho Ci Minh City (46.9%), partly aided by the low base in 1H/2022. Meanwhile, some early movers in the region, such as Singapore (-7.9%) and Seoul (-4.9%), recorded a decline in 2H/2022, mostly due to the normalization of room rates after rapid rises previously.