Exploring Savills APAC Prime Benchmark Across Key Asset Classes

Savills Prime Benchmark report explore major property sectors in key cities around the region. While a comprehensive insight, this report, particularly the market cycle comparison, should not be confused with the market overall. Read the report to understand how prime office, retail, logistics, and luxury serviced apartments are performing across the region.

Offices

In H2/2023, the prime office rental market showed signs of recovery, however, this movement remains slow. Rent changes ranged from (4.6%) in Manila to 12% in Mumbai. In Ho Chi Minh City and Ha Noi, growth was equal at 2.9%.

Most cities are either in late upswing, late downswing, or early downswing stages.

Amidst ongoing macroeconomic headwinds and heightened market uncertainties, only 9? of?21?markets recorded rental growth in local currency terms in?H2/2023. These markets are experiencing an undersupply of premium grade stock, particularly Mumbai, Brisbane, Seoul?and several major Southeast Asian markets like Ho Chi Minh City, Singapore, and Kuala Lumpur.

In contrast, the remaining markets are currently facing either excess office space and/or much higher vacancy levels with rents remaining under pressure, particularly in Manila, Guangzhou, and Hong Kong.? In terms of occupancy costs in US dollars, a stronger US currency caused a different outcome for some markets with weak currencies, such as Japan and China. For example, Tokyo (1.6%), Beijing (1.7%), Shanghai (1.5%), and Shenzhen (0.4%) recorded mild declines in local currency terms, while rents in US dollar terms saw a slight growth (Tokyo:?0.5%, Beijing:?0.3%, Shanghai:?0.6%, and Shenzhen:?1.7%).???

Rent in most Chinese cities, such as Beijing, Shanghai, Shenzhen, and Guangzhou, experienced a minor decline. Hong Kong maintained its position of having the highest total prime office costs of US$194/m2/month, including management fees and taxes.

Matthew Powell, Director of Savills Ha Noi commented:

"Office rental prices in Viet Nam are still relatively low compared to other markets in the Asia-Pacific region. In Ha Noi, we expect the addition of major commercial projects to 2026. Considering the forecast economic growth and industrial performance for the next three years, rent will be relatively stable. Prospective tenants should consider this as an ideal time to lease office spaces or expand their existing offices.”

Prime retail malls

Prime retail rental markets showed signs of recovery in?H2/2023, with rental movements ranging from (10.4%) in Seoul to 5.7% in Ha Noi. Benefiting from robust cross-border tourism and resilient domestic consumption, most markets had mild rental growth or remained stable in?H2/2023, with Ha Noi (5.7%), Osaka (5.4%), and Hong Kong (3.2%) registering the highest growth rates.?

Seoul was the only exception with a?(5.9%) rental decline in local currency terms in?2H/2023, due to a tenant-dominated market and softening consumer consumption. Looking ahead to?2024, slower economic growth and softer consumer spending will weigh on the rental recovery, but the robust rebound in cross-border tourism could offset some of these negative impacts.

"International brands maintain a high level of interest in the Ha Noi market. There have also been signs of recovery in the early months of 2024. Some brands have concluded feasibility studies and several are now involved in negotiations. However, the degree of recovery varies. While some prominent retail centres experienced an upsurge in sales, others encountered challenges in terms of price competition and occupancy.” - Matthew Powell

Logistics

Prime logistics rental markets were the best performers compared with other asset classes in?H2/2023, with rental movements ranging from?(1.3%) in Hong Kong to?7.4%? in Sydney. Most markets maintained rental growth in?H2/2023, but that growth momentum slowed following fading demand from e-commerce and the slowdown in global trade activity.?

Luxury Serviced Apartments

Luxury apartment rental movements were relatively stable, ranging from (3.4%)? in Kuala Lumpur to?5.8%? in Taipei. Rents in Taipei moved out from their lowest level since?H1/2010?and recorded the highest rental growth of 5.8% in H2/2023?amid an improvement in leasing sentiment. Hong Kong (0.6%), Osaka (0.4%), and Guangzhou (0.1%) also picked up slightly in?2H/2023, supported by steady demand for luxury residential units.

"A significant influx of foreign direct investment (FDI) capital in Viet Nam continues to boost the recovery of serviced apartments. As Ha Noi aims to develop industrial parks and clusters like Hoa Lac High-Tech Park, and the city will focus on developing electricity, telecommunications, and information infrastructure to attract foreign investors. This is likely to support future demand of serviced apartments" - Matthew Powell

Hotels

The prime hotel market remained a bright spot in H2/2023. Room rates in most markets maintained growth momentum. Thanks to a strong recovery in cross-border tourism, Hong Kong recorded the highest room rate growth in the region, fuelled by the gradual return of mainland China tourists and a low base of comparison.

Other popular travel destinations also registered double-digit room rate growth, such as Ha Noi at 26.2% YoY, Taipei at 25.5% YoY, and Ho Chi Minh City at 14.4% YoY. While room rates fell in Tokyo (28.4%) and Osaka (36.7%) with room rates returning to normal after the extreme highs of last year.

Conclusion

Viet Nam’s major markets like Ha Noi and Ho Chi Minh City remain regionally competitive within the region and deliver prime opportunities for enterprises looking to enter these dynamic markets. Given the opportunities that exist, businesses looking to explore the Vietnamese market should consider a range of property services from investment, advisory services, commercial leasing and industrial leasing.