In a mid-year update to its Investment Strategy Annual report, LaSalle Investment Management says opportunities arising from a ‘capital gap’ exist across all property sectors in the Asia Pacific region.
Asian commercial property markets which experienced the biggest lift in rents and capital values post-GFC surpassed all previous peaks, according to LaSalle, the more volatile markets like Hong Kong and Singapore are experiencing rental decline in some sectors.
“This has not translated to lower capital values except for secondary stock. A two-tier market persists, in which capital predominantly targets assets in prime locations with good covenants,” the report says.
Paul Guest, LaSalle Asia Pacific head of research and strategy, says LaSalle sees opportunities arising from this ‘capital gap’ across all property sectors, “though of course the strategies will differ country by country.”
“In addition, we remain favourable on hotels across the region - principally, but not exclusively - in the 3 to 4 star business hotel segment. We favour development in Korea but repositioning in Australia and Japan, and stabilised assets, if they can be found, in Singapore and Hong Kong,” Guest says.
LaSalle says the largest economies in Asia Pacific have been steadily cooling as a result of slower global growth, continued uncertainty, and the after-effects of monetary tightening.
“Nevertheless, the region is moving forward due to medium-term income growth combined with growing intra-regional trade, travel and investment flows,” it says.
“There are a number of differing cyclical dynamics underway in Asia’s commercial property markets and cycles can turn dramatically, as proven by the pick-up in residential activity in Hong Kong.”
LaSalle forecasts sentiment will remain volatile, and impact commercial property occupation demand. Given tight supply, rental decline is forecast only where the supply pipeline considerably exceeds historical norms.