Highlights
- The prime office rental market saw a gradual improvement in 1H/2023, with rental movements from -2.6% (Hong Kong) to 5.3% (Seoul). 18 out of 21 cities recorded rental growth in local currency terms in 1H/2023. Seoul was the best performer across the region with the highest rental growth and a very low vacancy rate, while rents in Hong Kong (-2.6%), Osaka (-1.3%) and Shanghai (-1.1%) were under pressure amid excess office space and higher vacancy rates. In terms of occupancy costs in US dollar terms, a stronger US dollar presented a different picture for some markets with weak currencies. 8 out of 21 cities recorded a rental decline in US dollar terms, with mild growth in local currency terms. These cities were mainly in Japan and China as the two countries experienced currency depreciation in 1H/2023.
- The prime retail rental market continued to recover in 1H/2023, with rental movement from -4.8% (Hanoi) to 5.7% (Hong Kong). Regional retail market sentiment has improved, thanks to the full resumption of cross-border travel and retailers and new market entrants have started looking for new retail space. Most cities saw mild rental growth in local currency terms in 1H/2023, with Hong Kong (5.7%), Singapore (3.1%) and Taipei (2.6%) registering the highest rental growth. However, higher interest rates and economic uncertainties weighed on consumer spending in most cities and retail sales growth in most cities slowed in 1H/2023. As a result, the prime retail rental markets in most markets are expected to continue their slow recovery in 2H/2023.
- The prime logistics market remained resilient in 1H/2023, despite the weak export demand and muted e-commerce activity. Rental performance ranged from -1.7% (Singapore) to 16.8% (Melbourne). Major Australian cities continued to outperform in 1H/2023 (Melbourne: 16.8% HoH, Sydney: 10.4% HoH, and Brisbane: 6.5% HoH), fueled by a limited stock of logistics facilities and extremely low vacancy. The cities with excess logistics space also saw slight rental growth, including Beijing and Shanghai, which both posted growth of 1.5% HoH and 0.8% HoH, respectively. Meanwhile, prime rents in Singapore and Kuala Lumpur fell by 1.7% HoH and 0.8% HoH in 1H/2023 due to weak export demand.
- The luxury apartment rental market remained stable across the region in 1H/2023. Rental movement ranged from -3% (Manila) to 9.2% (Kuala Lumpur), with Kuala Lumpur (9.2%) and Singapore (8.9%) registering the highest rental growth rates. The rapid rental growth in Singapore was mainly supported by the influx of expatriates and high net-worth individuals, as well as the limited supply of private residential properties, while rental growth in Kuala Lumpur was a temporary rental adjustment caused by the rapid decline in rents during the pandemic. Rents in Hong Kong and the major Chinese cities also saw a slight rebound in 1H/2023 due to the gradual return of expatriates, ranging from 0.1% (Hong Kong) to 2.2% (Guangzhou).
- Hotel markets remained active in 1H/2023, with room rate changes ranging from -41.7% (Osaka) to 34.5% (Seoul). All cities were in an upcycle, with the exception of Shenzhen and Kuala Lumpur. Seoul registered the highest room rate growth of 34.5% HoH in 1H/2023 and surpassed pre-pandemic levels, fueled by robust demand from domestic and inbound travelers. Jurisdictions slow to lift border restrictions also rebounded to above pre-pandemic levels, such as Hong Kong, Taipei, Guangzhou and Beijing. However, growth was mainly the result of rising labour costs and revenge travel to both domestic and short-haul destinations. Meanwhile, some cities which saw an early resumption of cross-border travel also recorded a decline in 1H/2023, such as Osaka (-41.7%), Tokyo (-17.9%) and Ho Chi Minh City (-1.9%), but this was mostly down to the process of returning to normal room rate levels.