Retail property in Asia Pacific outshines other sectors

Source : Business Times – 19 Dec 2009

RETAIL property in Asia Pacific continues to outshine other sectors as rents grow, showed a new report by DTZ.

Retail rents have performed well with growth of around 3 per cent per year since 2004 – without any significant falls. The level of growth has been maintained despite overall negative performance during the earlier part of 2009, DTZ noted.

Additionally, retail rents returned to positive growth in Q4 as the more heavily weighted markets (Shanghai and Singapore) have turned positive.

‘Retail markets are generally doing well with quarterly rental growth rates up to 8 per cent being reported during the year,’ said David Green-Morgan, head of DTZ Asia Pacific Research. ‘Strong retail sales have been sustaining retail markets across the region. Government stimulus across the region has helped sustain the retail sector and this is helping to sustain rental levels and boost prices in many locations.’

By contrast, the Asia Pacific office and industrial markets continue to be sluggish as 2009 comes to an end, DTZ said.

Over the course of the year, the office sector experienced the largest fall with a peak to trough decline in office rents of around 27 per cent so far. Industrial rents, on the other hand, have fallen around 3 per cent year-to-date, with the possibility of further falls to come. Despite more encouraging economic fundamentals across the region, occupier demand for these two sectors remains weak on the back of slow global growth, DTZ noted.

But the report also pointed out that both office and industrial sectors around the globe have either reached or are approaching the bottom of the rental cycle as many markets have reached a balance between supply and demand – albeit at a much lower level than the peak of the cycle.

In Q4, global office rents fell by 2 per cent while industrial fell by one per cent. But global retail rents grew by 0.2 per cent on the back of the gains in Asia Pacific and levelling out in Europe.

The report also noted that global capital city prime rents are highlighting the continuing trend for the flight to safety. Prime rents in the main markets have held up far better than anticipated. Rents in London City, Paris’s central business district, Hong Kong and Sydney have all levelled off during Q4 where many tier two cities continued to fall.