Two very different worlds

October 11, 2011 / By  

The thing that intrigues me about living in Asia is the very stark contrasts you see everywhere, glittering office towers sat next to run down residential blocks, wet markets sitting next to luxurious food halls. However, the thing that’s intriguing me most at the moment is just how much we, here in Asia Pacific, contrast with the rest of the world.

Currently the west is having a challenging time of it. Growth for next year in the US is forecast at a very modest 1.8% and the EU even lower at 1.2%. On this basis, it’s no wonder we’re seeing countries such as my homeland, the UK, turning to the virtual printing presses to doll out another round of quantitative easing in a bit to stimulate growth, jobs and to try and avoid a double dip. It’s a very different world here. Asia Pacific is forecast to grow at 5.9% next year, that’s more than four times the growth rate of the EU.

This positive economic outlook can very clearly be seen trickling through to our real estate markets regionally, no small coincidence as investors and companies look to expand in Asia to try and grab a slice of this higher growth. Indeed we forecast that by the end of 2011, net take-up of office space will hit a historical high regionally, above the records we saw in 2007 prior to the global financial crisis when the west was very much trundling along nicely. An amazing demonstration of this is the fact that take-up in Beijing for the 12 months to 2Q11 was more than a million square meters, that’s more than the take-up of Central London and Manhattan combined!

With strong demand for space post financial crisis, it’s little wonder we’ve seen rents rebound significantly in most markets. As an example, our preliminary 3Q11 data from our Real Estate Intelligence Service (REIS) which we’ve just released to our paying clients shows that Beijing CBD rents are now 23% higher than their previous peak.

On the investment front, the picture has been even stronger with capital values in Beijing, Hong Kong and Shanghai now significantly above pre GFC peaks (84%, 48% and 22% respectively). Indeed, Beijing capital values last quarter grew by a staggering 11.8%, a growth rate that would have most international investors spluttering into their whiskey tumblers with excitement. It’s little wonder then, that investors are keeping a very keen eye on Asia for opportunities.

It’s an exciting time working in real estate research at the moment here in Asia Pacific. So, if you want to know more about what’s happening on the ground and want to get the inside track into Asia Pacific real estate markets, please feel free to contract me at about subscribing to our REIS services.

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