Three Of Asia Real Estate's Bright Spots

Despite the challenges global real estate markets are facing, Asia's economies and cities have diverse growth opportunities. Savills Prospects highlights three of these regions, including Viet Nam, Singapore, and Japan. 

Prospects expects that the emerging economies in Asia, including China, Viet Nam, Indonesia, and India, will drive global economic growth in 2023. Even developed economies like Australia and Japan are expected to surpass the United States and European Union by a significant margin.  

Viet Nam 

Growing foreign direct investment and government reforms are boosting overseas interest in the Vietnamese real estate market. While some domestic developers are struggling with tightened credit controls, overseas capital remains active. For example, Singapore’s CapitaLand announced in early 2022 that it would buy a site in Ho Chi Minh City for a US$1 billion mixed-use development.  

Savills Q3/2022 data highlighted that CBD office and retail rents are rising in Ha Noi and Ho Chi Minh City. Hoang Nguyet Minh, Senior Director, Commercial Leasing, Savills Ha Noi, stated that demand for offices between US$25 to US$30/m2 (excluding service fees) in Ha Noi is expected to increase significantly. Several Grade A office buildings are set to open in Ha Noi in 2023, which will boost activity. Minh also highlighted that Viet Nam is a key retail market, with businesses looking to enter and expand, including fashion, cosmetics, and sportswear brands from Singapore, Korea, Japan, and Indonesia.

Investment in the industrial and logistics sector is being driven by manufacturers wanting to diversify operations as part of a China Plus One approach.  

See Further: See Why Industrial Real Estate Supply Likely to Increase 

Troy Griffiths, Deputy Managing Director at Savills Viet Nam, said: “The Vietnamese government is introducing measures to improve real estate transparency, which bodes well for future liquidity. It is also investing in infrastructure. We are seeing continued investor interest in several sectors.”  

Singapore  

MSCI Real Assets recorded US$9.1 billion of real estate investment deals in the first three quarters of 2022, increasing by 47% YoY. Savills research highlights rising CBD office rents amid falling vacancy, despite concerns about the global economy, particularly the technology sector. This sector has become a significant occupier in Singapore, even with the decrease in vacancy rates.   

Singapore's residential rental sector is experiencing a significant increase, with the Urban Redevelopment Authority's rental index for private residential properties rising by 8.6% quarter-on-quarter in Q3/2022, the highest quarterly growth in 15 years.   

Rents for logistics properties also rose 2.8% in Q3/2022, with a further increase expected in 2023. “Notwithstanding global economic problems, local industrial and warehouse rents are expected to rise in 2023,” says Alan Cheong, Head of Savills Singapore Research and Consultancy. 

Japan 

Despite rising finance costs for real estate investors in many parts of the world, the Bank of Japan has opted not to increase interest rates. As a result, appealing financing options are still accessible. With a projected GDP growth of 1.6% in 2023, which is comparatively stable among developed nations, assets in Japan may appear inexpensive to foreign buyers due to the weak Japanese yen.  

“Japan continues to attract overseas investors due to the positive spread between debt costs and yields. The multifamily and logistics sectors continue to be favourites; however, there is also more interest in offices and the recovering hospitality sector,” says Tetsuya Kaneko, Head of Research and Consultancy at Savills Japan.  

The multifamily sector is regarded as one of the most resilient in uncertain economic times and has been highly sought after by foreign investors. Four of the top five buyers of Japanese multifamily in the past five years were foreign investors, data from MSCI Real Assets show.  Blackstone Group, Allianz Real Estate, AXA IM and Nuveen have invested circa ¥800 billion (US$5.75 billion) in the sector.  

Foreign investors were amongst the bidders for the Japanese Ministry of Finance’s share of the Otemachi Place office tower in Tokyo. However, they were beaten by a domestic consortium which paid ¥436.4 billion (US$3.13 billion), a new record for Japanese property.  

Overall, Asia remains an attractive destination for foreign investors. “These are just some of the bright spots to be found in Asia Pacific real estate, but they are not the only ones,” says Simon Smith, Head of Research and Consultancy, Savills Asia Pacific, “There are positive stories to be found in sectors and markets all over the region.” 

Conclusions 

If you are interested in receiving the latest market updates, contact Savills Research Team. Our specialist teams deliver insight into current market trends and provide expert forecasts that support sound property decisions. Contact Do Thu Hang for more information. 

 See more:  

• FDI – A Firm Solution for Real Estate Businesses 

• New Credit Adjustments to Pave the Way for Real Estate FDI 

• Strong FDI Inflows for High-Value Manufacturing Across Southeast Asia