Marktbericht Asien April 2011

Notwithstanding the repercussions from the earthquake in Japan, the leading economic indicators for Asia are generally positive, which translates into robust demand for commercial real estate among investors and tenants.

Executive Summary

• Commercial property values are rising as investors eye the improving rental outlook and greater liquidity. There was a hefty year-over-year increase in property sales in Asia in 1Q11, while some large real estate firms are going public.
  
• Demand for office space in markets such as China, Hong Kong and Singapore is pushing rents higher. Acquisition yields are compressing in office markets such as Hong Kong and Singapore.
  
• The region is fast becoming a key market for international luxury retailers. China, in particular, is projected by McKinsey to account for 20% of the global sales of luxury goods by 2015, which should help sustain demand for prime retail space in the mainland. Spending by mainland Chinese travelers is becoming a key tourist revenue source for other Asian countries.
  
• With lenders upbeat about Asia’s economic prospects, the debt markets are stable. The region’s banks increased the size of their loan portfolios by 16% in 2010.
  
• Concerns remain that rising energy and food prices have the potential to diminish the region’s growth in the short term. Heightened inflationary expectations will prompt Asia’s central banks to step up interest rate increases or allow further local currency appreciation.
  
• Although Japan faces considerable economic uncertainty, actions taken by policymakers immediately after the earthquake – including an injection of liquidity by the Bank of Japan (BOJ) and the government’s planned reconstruction spending – have helped to restore some calm to the market.
  
• The Tohoku earthquake in Japan on March 11 will cost the nation as much as USD5 billion, or about 4% of GDP, according to the World Bank. In comparison, the Kobe earthquake in 1995 cost only US0 billion. To assist the reconstruction, the BOJ will keep interest rates low for a prolonged period. The Greater Tokyo Area suffered relatively limited structural damage, so the real estate market in central Tokyo should be resilient in the long term.