CBRE Sees China as the Difference Maker in Asian Real Estate

CBRE's Nick Axford

As reported last week in Toronto’s Globe and Mail (nice to see that someone’s marketing department is getting those press releases out there), the major worry in Asia’s real estate market is the large number of commercial real estate projects under construction, as generally strong GDP growth rates and other economic factors continue to encourage investment by developers.

According to the story in the Globe and Mail, here’s what CBRE had to say in the podcast,

It’s clear that both corporate users and investment will continue to flow into the Asia Pacific market, said Nick Axford, head of Asia Pacific Research for CBRE, in a recent podcast discussion. “While the global uncertainty has created an unfavorable environment across the world, it’s a very different picture in the Pacific,” he said. “As long as the region doesn’t see another serious global setback, the expectations are that most of the local economies are going to see healthy levels of growth in the next year.”

Office supply issues are affecting India, Seoul, Singapore and the secondary markets of China, as developments now under construction and through the next few years will put a strain on vacancy and rent in 2012. In Singapore, for example, the pipeline holds about 10 million square feet of new construction through the next five years. “Class A office will likely see a 10% decline in the next year,” said Petra Blazkova, head of research for Singapore and Southeast Asia, during the podcast. “Class B and below office will likely see somewhat worse declines.”

Across countries such as China, Australia and India, however, the vacancy problems are varied. Cities such as Bombay, New Delhi and secondary markets in China face large pipelines of development, while Beijing, Sydney and Bangalore are tight, and will likely stay tight for the next few years.

The benefits of the Asia Pacific region are many, Axford said, such as companies that are closing offices throughout the rest of the world are making sure to create a presence in this region. Gross Domestic Product is expected to top 5% in the first quarter of 2012, while the rest of the world will stay below 5%. China’s GDP cruises above it all at around 8%, with the government’s attempts to slow growth hampered by worries about increased inflation.

In China 2011 saw the office market devour an unusually large amount of new supply (nearly one million square metres by many estimates), so while there may be some concern of oversupply in the pipeline in some markets, this doesn’t seem to have appeared in China’s first-tier cities such as Shanghai, Beijing, and Guangzhou.