Fighting the headwinds - Domestic demand steady despite trade war uncertainty. Q3 2018
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Asia Pacific Property Digest Q3 2018 Fighting the headwinds Domestic demand steady despite trade war uncertainty.
13
Office
4 35
14 Hong Kong
15 Beijing
16 Shanghai
17 Shenzhen
18 Taipei
19 Tokyo
20 Osaka
Feature
21
22
Seoul
Singapore Retail
23 Bangkok 36 Hong Kong
Articles 24 Jakarta 37 Beijing
25 Kuala Lumpur 38 Shanghai
26 Manila 39 Shenzhen
04 Economic resilience as clouds gather
27 Ho Chi Minh City 40 Tokyo
05 Buoyant property markets
28 Delhi 41 Seoul
08 Co-living: can it work in Australia?
29 Mumbai 42 Singapore
09 Consumer analytics - Indian malls’
30 Bengaluru 43 Bangkok
trump card
31 Sydney 44 Jakarta
10 Finance sector opening-up to bring
new opportunities to Shanghai 32 Melbourne 45 Delhi
11 Non-conventional use of space in 33 Brisbane 46 Sydney
Singapore malls 34 Auckland 47 Melbourne
Editor's Note
Despite the trade war uncertainty, the Asia Pacific economy is sailing on course at the back of resilient
domestic demand.
Healthy leasing momentum persists in the office market, up by 15% y-o-y in the third quarter as occupier
demand in the technology, finance and flexible space sectors remain steady.
Retail operators continue to prioritise their efforts in building experiences and services that cater
to diversified consumer tastes.
The logistics and warehousing sector saw rents edging up further amid sustained strong demand.
For more detail by asset class, view this report online at http://www.jllapsites.com/research/appd-online/.
The Asia Pacific research team hopes that you find this publication valuable, and we welcome
your feedback.
Thanks,
Dr Megan Walters
Head of Research – Asia Pacific
49 59 67
Residential Hotel
50
51
Hong Kong
Beijing
Industrial 68 Hong Kong
52 Shanghai 60 Hong Kong 69 Beijing
53 Singapore 61 Beijing 70 Shanghai
54 Bangkok 62 Shanghai 71 Tokyo
55 Jakarta 63 Tokyo 72 Singapore
56 Manila 64 Singapore 73 Bangkok
57 Sydney 65 Sydney 74 Jakarta
58 Melbourne 66 Melbourne 75 Sydney
4 – Features
ASIA PACIFIC ECONOMY
Economic resilience as clouds gather
It’s been a rocky year. A mounting trade war between China and the U.S. is challenging global trade. Tighter U.S. monetary
policy and dollar strength are weighing on currency markets and investor sentiment. China’s rebalancing maintains course
and the gentle slowdown endures. All of this has added up to an environment of heightened uncertainty. Fortunately, growth
momentum has shown strength and held up remarkably well.
Trade war risks rise Murky inflation and interest rate Domestic drivers moving to the
outlook forefront
Exports have so far shown a more
resilient performance than would Elevated oil prices and strong U.S. There have been no major changes
be expected given the challenging dollar have presented problems to economic forecasts with growth
situation facing global trade. for emerging markets—weakening expected hold up well, albeit
Nonetheless, the spectre of a currencies, weighing on equity markets momentum is anticipated to ease
protectionist environment looms and and putting pressure on interest rates— slightly as global prevailing headwinds
there are signs that export orders and even those with strong fundamentals. continue. Buoyant domestic demand
factory activity are softening. Tensions Central banks in India, Indonesia and supportive policies should
between the world’s two largest and Philippines have been quick to underline economic resilience and
economies have continued to ramp up respond to this situation by raising help offset a moderation in export
with tariffs measures announced worth key rates and more hikes could be on momentum as governments place
hundreds of billions of U.S. dollars, the horizon if the situation persists. greater emphasis on facilitating
and the conflict seems unlikely to be However, the heightened uncertainty domestic drivers. As more countries
settled in the near term. While a deal is supporting a continuation of low- climb the income ladder, this will help
could still be struck between China interest policies in countries such as lift more people into the middle class
and the U.S., a protracted battle will Japan, Korea and Australia. While and further support an upgrade in
challenge growth momentum as the interest rate uncertainty is likely to consumption.
effects ripple through supply chains remain present in the near term, rates
and impact market sentiment. are expected to gradual rise in the long
term as risks slowly dissipate.
5 – Features
Table 1: Outlook for Major Economies
Real GDP Growth (%)
Country 2019 Outlook
2018F 2019F
Solid consumption and strength from the services sector to provide support. However, a gradual
China 6.5 6.0
slowdown to persist as slower credit growth and trade tensions weigh on activity.
A tight labour market and wage growth to bolster consumption and incentivise investment in
Japan 1.0 1.2 automation. Trade growth to slow amid global headwinds while a proposed 2019 GST hike poses a
downside risk.
Robust growth albeit momentum to ease with consumption and infrastructure investment key
India 7.6 7.2
drivers. Central bank to closely watch currency and oil price movements as inflation risks remain.
Increased government spending and accommodative monetary policy to provide support. Export
South Korea 2.6 2.5
growth to slow dented by trade tensions while consumption likely to be soft.
Positive momentum for export volumes and business investment, but ongoing headwinds to weigh
Australia 3.3 2.6
on consumer spending and residential market.
Public infrastructure investment and household spending to underlie stable growth. Central bank to
Indonesia 5.1 5.1
keep the focus on stabilising the currency.
Solid labour market supportive of consumption but housing market uncertainty and weak equity
Hong Kong 3.6 2.3
market may be a drag. Expansionary fiscal policy to help buoy the economy.
Trade protectionism to dampen export and manufacturing activity. Government policies to
Singapore 3.3 2.4
encourage business investment and healthy infrastructure spending to be sustained.
Source: Oxford Economics, November 2018
ASIA PACIFIC PROPERTY MARKET
Buoyant property markets
Commercial property markets stayed on track despite elevated uncertainty. Office occupiers have carried on leasing space
at a brisk pace with structural shifts in occupation underlying strength in demand for flexible space. While solid occupier
fundamentals and the positive outlook continued to support the case for real estate investment—albeit with transaction
volumes growth easing from its earlier blistering pace. Although global headwinds continue to blow, real estate market
conditions should remain buoyant supported by solid growth prospects.
Office leasing maintains robust pace Healthy volume of office completions Quarterly rent growth led by
Overall leasing activity was up 15% y-o-y Tokyo, Delhi, Hong Kong and Shanghai Guangzhou and Osaka
in Asia Pacific in 3Q18, contributing to together accounted for half of the total Asia Pacific rent growth accelerated
the year-to-date improvement of 24% completions figure of nearly 1.2 million slightly to 1.2% q-o-q in 3Q18 with several
y-o-y. Bengaluru was the regional leasing sqm in 3Q18. Although a healthy level, new markets surprising on the upside. Relatively
volumes leader in 3Q18 while high volumes supply declined 36% q-o-q or 22% y-o-y as moderate rental growth was recorded in
were also observed in Manila, Delhi and a number of markets recorded no or much Shanghai and Beijing; however, healthy
Melbourne. Gross leasing volumes were fewer completions. Despite the new supply, demand and declining vacancy saw
down in markets such as Sydney and Tokyo vacancy decreased in the majority of the rents rise at a robust pace in Guangzhou.
but in large part due to limited availability Asia Pacific markets tracked during 3Q18. Landlord favourable conditions supported
of space. Shanghai, Hanoi and Taipei all saw vacancy a continued uptrend in Hong Kong
decline by more than 1 percentage point rents, while tight vacancy and strong
Net absorption was up 12% y-o-y as q-o-q, while Kuala Lumpur recorded an pre-commitments gave Tokyo landlords
occupational demand remains healthy increase of more than 1 percentage point sufficient confidence to raise rents. Rents
across the region with many markets amid softer demand and new completions. maintained on a growth trajectory in
reporting broad-based leasing activity. Singapore, albeit with the pace easing up
The strongest net absorption was recorded slightly from 2Q18. Fairly balanced supply
in markets such as Tokyo, Shanghai and and demand dynamics saw Mumbai SBD
Melbourne. BKC and Bengaluru SBD rents hold flat.
Tightening vacancy supported moderate
rent growth in Melbourne and Sydney
CBDs.
Focus on building experiences and a breather with Australia and Hong Kong investment activity came in relatively
6 – Features
services in the retail sector both softening during the quarter. However, balanced in terms of acquisition and
China rebounded from a quiet second disposals from a net purchasing bias in the
Mall operators in China are actively
quarter to deliver growth of 14% y-o-y. first half of the year.
adjusting tenant mixes to keep up with
South Korea continued to show increasing
changing consumer tastes; F&B, lifestyle Further capital appreciation
levels of activity, with 320% growth on
brands, furniture stores and online retailers
the corresponding quarter last year. In Prime office capital values continue to be
all continued to expand their presence.
part, a strong U.S. dollar is also impacting supported by healthy rental growth and
Leasing momentum improved for high
growth rates as most Asian currencies have investor demand. In Hong Kong, capital
streets in Hong Kong’s core areas except
depreciated against the U.S. dollar over the values continued to grow on the back of
for Central, where landlords of shops with
past year. strong prices attained in both the en-bloc
large rental payments struggled to secure
tenancy without major rental reductions. and strata-titled office sales market. Solid
The office sector made up half of all growth in Tokyo capital values was driven
F&B operators remained a key source of transaction volumes, while the industrial/
leasing activity in Singapore, while demand by cap rate compression, while a moderate
logistics sector recorded slightly higher rise in Seoul capital values was underlined
grew from activity-based retailers. Retailers transaction volumes than the retail sector.
in Australia continued to focus on existing by an improvement in rental income.
Cross-border investment activity accounted Several transactions closed in Singapore
store performance and customer service— for one-quarter of total transaction
utilising new technologies and concepts. with high pricing, leading to capital value
volumes, up slightly on the previous growth in excess of rent growth.
quarter but down marginally on long-term
Demand for prime logistics space still averages due to the higher concentration
strong of deals in South Korea. Cross-border
Demand continued to be driven by
e-commerce, 3PLs and manufacturing
firms in China. Beijing was characterised Figure 2: Office Rental & Capital Value Changes, Yearly % Changes, 3Q18
by renewals during the quarter, while
Shanghai saw strong take-up in one of the 20
new completions. Amid the lagged effect
of the trade war as well as tight vacancy, 15
a number of 3PLs expanded their space
requirements in Hong Kong. The shortage 10
in labour, especially truck drivers, drove
the demand for efficient modern logistics
5
space in Tokyo. In Singapore, logistics
demand was driven mainly by renewals
and relocations. Demand was steady in 0
Sydney and Melbourne with retail trade and
transport, postal and warehousing sectors -5
the main demand drivers.
-10
Residential market sentiment
e
ne
ey
k
ng
ila
ng
yo
i
ai
l
rta
ba
ou
or
ko
gh
dn
an
k
ur
Ko
iji
impacted by policy measures
ka
um
Se
ap
To
ng
Be
an
bo
M
Sy
Ja
ng
ng
Ba
M
Sh
el
Ho
Si
M
The proposed vacancy tax in Hong Kong
has led developers to take a less aggressive Rental Values Capital Values
pricing stance for new projects. Although
Figures relate to the major submarket in each city
buyer sentiment started the quarter on a
Source: JLL (Real Estate Intelligence Service), 3Q18
strong note with some new projects rapidly
achieving high sales rates, sentiment
faded considerably towards quarter-end Figure 3: Direct Commercial Real Estate Investment 2008-3Q18
as uncertainties related to the economic
outlook and new vacancy tax set in. 160
YTD 2018
Transactions volumes for villas and luxury $116.9 bill
apartments in Beijing decreased from a 140 20% y-o-y
year earlier with the tighter lending policy
restraining demand and leading some 120
prospective buyers to the leasing market.
In Shanghai, sales momentum held strong 100
in the high-end market due to pent-up
upgrading demand and new supply. 80
Investors stay the course despite 60
uncertainty
40
Investment activity across the Asia Pacific
region steadied in 3Q18 after a strong first 20
half of the year, with total year-to-date
activity reaching USD 116.9 billion (+20% 0
y-o-y). Total transaction volumes were 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD 2018
relatively flat (+3%) y-o-y at USD 35.6 billion Japan China Australia Hong Kong South Korea Singapore Other
in 3Q18. Some of the strongest growth
markets over the first half of the year took Figures refer to transactions over USD 5 million in office, retail, hotels and industrial.
Source: JLL (Real Estate Intelligence Service), 3Q187 – Features
Figure 4: Rental Property Clocks, 3Q18
Grade A Office Prime Retail
Tokyo, Wellington Kuala Lumpur Wellington
Hong Kong Beijing, Tokyo*
Auckland
Auckland Shanghai
Beijing
Taipei, Singapore
Sydney Growth Rents
Growth Rents
Manila, Slowing Falling Jakarta, Slowing Falling
Melbourne Kuala Lumpur
Seoul*, Manila
Osaka
Rents Decline Rents Decline
Canberra Rising Slowing Rising Slowing
Ho Chi Minh City, Mumbai, Bangkok
Bengaluru Jakarta
Guangzhou, Shanghai Delhi
Bangkok, Delhi Bengaluru
Perth, Chennai Melbourne (Regional), Chennai
Seoul Singapore
Adelaide, Mumbai Hong Kong *
Guangzhou, Sydney (Regional),
Hanoi, Brisbane
SE Queensland (Regional)
Note: Clock positions for the office sector relate to the main submarket in each city. *High Street Shops/Multi-level High Street
Prime Residential Prime Industrial
Manila
Shanghai
Bangkok
Tokyo
Wellington
Auckland
Guangzhou Jakarta
Growth Rents Growth Rents
Slowing Falling Slowing Falling
Hong Kong
Manila, Sydney
Rents Decline Rents Decline
Shanghai
Rising Slowing Rising Slowing
Beijing Melbourne
Singapore* Singapore (Business Park),
Beijing
Kuala Lumpur Hong Kong
Brisbane Singapore (Logistics)
*Luxurious *Logistics space (Hong Kong, Shanghai, Beijing, Greater Tokyo)
Source: JLL (Real Estate Intelligence Services), 3Q18
Property markets to maintain good Despite rising interest rates in many
momentum markets, underlying fundamentals remain
firm and forecasts for further rental growth
The outlook for leasing activity remains
should see real estate investment remain
bright and we hold the view that full-
attractive to investors. However, investors
year 2018 volumes will higher than the
are likely to remain selective and may
2017 level, with risk tilted to the upside
continue to face difficulty sourcing product
following the region’s strong performance
in some markets.
in the first three quarters. Occupational
demand is expected to remain diverse with
leasing activity led by tech, finance and About the author
flexible space operators. Given the strong Dr Megan Walters joined JLL in 2010 and in October 2016 was
performance this year and expectation appointed as Head of Research – Asia Pacific. In this role, Megan
of sustained occupier demand, we are leads a team of 170 professional researchers in the region, which
optimistic that leasing activity in 2019 forms part of a network of over 400 researchers in 65 countries
should be in line with 2018’s healthy level. around the globe.8 – Features
Co-living: can it work in Australia?
Co-living is touted as the next step in Figure 1: Home Ownership vs. Renting in Sydney
housing evolution, due to its potential to
45.0%
resolve a number of modern housing and
social challenges. From a planning point
of view, sharing more of our living space 40.0%
would relieve pressure on urban sprawl as
city populations continue to rise. From a
35.0%
social point of view, co-living can prevent
isolation and create a greater sense of
community. Co-living is also in line with the 30.0%
broader ‘sharing economy’ trend that has
taken hold over recent years in areas such
as vehicles and office space. 25.0%
Similar to student housing, co-living
20.0%
spaces offer a number of quality amenities
1996 2001 2006 2011 2016
and services including gyms, concierge,
cleaning services, laundry and so on, while Own outright Own With a Mortgage Rent
still affording tenants city living. The cost
of these services is usually included in the Source: Australian Bureau of Statistics
rent, which may be somewhat higher than
standard house share rents. However, the
additional cost incurred to pay for these to continue as millennials increasingly to other global cities such as New York
services separately would even out the enter the workforce over the coming (32.0%) and London (48.2%), is also likely
additional cost. years, capitalising on global mobility and playing a role. Home ownership is falling
expecting it at some point in their careers. (see chart) and attitudes are slowly shifting
The current demographic attracted to from suburban to urban lifestyles, but it still
co-living consists largely of millennials In Australia, the concept has lagged behind seems that the forces driving co-living in
(broadly, those born between 1980 – other markets, with the first property only other parts of the world are far less pressing
2005), many of whom are already used to opening in Sydney in October 2018. This in Australian cities, particularly outside
house sharing, facing housing stress, and is largely due to the persistent mindset of of Sydney. Until these dynamics change,
increasingly becoming disillusioned with many domestic households who still aspire the opportunity for co-living will likely
the idea of home ownership in the process. to own their own house on a quarter acre concentrate on a niche market consisting
Co-living is also popular in cites that attract block of land. Higher home ownership of students, temporary and newly arrived
a high volume of temporary and longer rates in major Australian cities (62.3% in workers.
term expatriate skilled labour force such Sydney and 66.4% in Melbourne) compared
as London, Singapore, New York and Hong
Kong, which also tend to be cities with
higher densities.
The attraction to co-living includes About the author
move in readiness, lease flexibility, price Ahmed Almihdar is a Senior Analyst for JLL, based in Sydney.
transparency and brand recognition, while Focusing on the residential sector, Ahmed’s key role involves
avoiding the higher costs of hotels and the analysis and preparation of quarterly market research
setting up individually. This trend is likely commentaries on the NSW and ACT residential markets.9 – Features
Consumer analytics - Indian malls’ trump card
The Indian retail sector is going through In the age of big data, some of the popular • Analysis of loyalty programmes by
a metamorphosis of sorts. Even as the technological tools that quality malls are retailers is also helping them to provide
sector is poised for a fresh burst of growth, either using or are planning to make use of a better-quality, store-level experience.
organised retail in India is thriving like are beacons, visitor tracking programmes Beacons make use of Bluetooth technology
never before. Smart mall owners have and analytics through mobile apps, and in smartphones with relevant apps and
now moved on to the use of technology loyalty programmes. Technology and are quite useful for targeted marketing
and consumer algorithms and analytics consumer feedback through such tools are in malls. There is also a greater emphasis
to ensure that physical retail continues to also finding greater traction with retailers being placed on tracking the usage of social
remain relevant. as they use these to improve in-store media by visitors in malls to understand
merchandise as well as the overall buyer their preferences.
Quality malls are consistently clocking browsing movement. Already, some of the
occupancies of over 90%, steady rental prominent retailers, such as Aditya Birla Similarly, video analytics can help to
growth and a steady increase in trading Fashion and Retail Limited, Shoppers Stop better merchandise placement by offering
densities. To sustain this momentum, they and Big Bazaar, are focusing on optimising greater visibility for high foot-traffic brands
are now moving past the ordinary methods the experience of the consumer through by putting them in mall areas that are
of just improving the tenant mix or ad hoc data and analytics. considered the most active based on a heat
brand refresh. There is now a strong school map analysis of the mall itself.
of thought that is looking at consumer Some typical examples of technology being
analytics as an important tool that allows used at mall and store level are: We, at JLL, have launched a new tech tool,
them to customise their mall strategies to PinPoint, which makes use of geofencing
enhance customer experience. • U
se of mall Wi-Fi by consumers software to create an accurate shopper
to understand the trajectory and profile.
Predictive analysis is holding sway, as circulation patterns of mall visitors at
analysing consumer buying behaviour and different times of the day and week. Going forward, the emphasis on technology-
mall circulation patterns are determining Mall mobile apps along with beacon driven analytics is bound to increase in
brand refresh and also being used to technology and sensors to create a malls. With advances in AI and the internet
enhance the customer experience, which more customised approach for each of things, malls could offer an enhanced
plays on the mall visitors’ interests. This shopper based on previous visits and experience for consumers, predicting their
aids in the placement of retailer brands preferences. needs before they realise it themselves!
that take into account consumer patterns • Store receipts, brand and merchandise Rigorous analytics will act as a moat against
without any lengthy and aimless consumer purchases and spends being future threats to the concept of shopping
surveys. analysed using AI to enhance in-store centres.
merchandise as well as a mall’s brand
mix.
About the author
Sumedh Gadgil is an Analyst for JLL, based in Mumbai. In his
role, he focuses on the Mumbai Retail sector and contributes
to bespoke assignments and white papers. Sumedh holds a
Bachelor’s degree with a specialisation in Economics.10 – Features
Finance sector opening-up to bring new
opportunities to Shanghai
Following the national government’s Chart 1: Average Grade A Office Take-Up of Top Multinational Finance Companies
pledge to speed up financial reform and
350
the announcement of 12 specific opening-
300
up measures in the 2018 Boao Forum for
Thousand sqm GFA
Asia, Shanghai has launched its action plan 250
of a 100 measures to further open-up the 200
economy and boost the city’s position as an 150
international finance centre. 100
35 out of the 100 measures announced 50
are related to the financial sector and are 0
aimed at firstly easing market access in
e
go
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is
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en
ng
or
do
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gh
the banking industry for foreign capital;
cis
Pa
ica
zh
iji
Ko
ap
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an
Lo
Ch
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ng
Sh
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secondly relaxing the restrictions on the
Fr
Ho
Si
n
Sa
proportion of shares and business scope in
Sample includes J.P. Morgan, Morgan Stanley, Goldman Sachs, Bank of America, Citi Bank, HSBC, BNP, Credit Agricole,
the securities industry for foreign investors; Credit Suisse, and Deutsche Bank
and thirdly encouraging the opening-up of Source: JLL Research, 2Q18
the insurance industry.
When we studied the average office set up their first offices in Shanghai; and are also flowing into Zhuyuan and Yanggao
take-up of ten global finance companies existing foreign finance companies that Road areas. In Puxi, besides core CBD
across key cities we saw that Shanghai have obtained licenses in new business Nanjing W. Road submarket, the emerging
has the potential to grow office demand areas and are looking for expansion. CBD North Bund submarket is also
from foreign finance companies. In terms capturing significant demand from finance
of scale, Shanghai still has a long way to The question is—which locations are likely companies.
go compared to the world’s finance hubs to benefit from an increase in demand
such as New York and London. However, in from foreign finance companies? Based As the financial markets continue to open
China, Shanghai is the runner up after Hong on transactions that have happened in up we expect increasing demand for office
Kong in terms of foreign finance company Shanghai in the first half of 2018 (with both space. Lujiazui will continue to strengthen
presence (Chart 1). domestic and foreign companies), Lujiazui its status as the financial centre of
is still the top destination for finance Shanghai; however, rising rents and supply-
Last year, Shanghai’s Grade A office market companies, especially from banking sector. shortage post 2019 will encourage spill-over
net absorption reached over 1.3 million But Lujiazui is not the only destination. For demand, particularly to the nearby high-
sqm GFA, and finance companies were the example, in Pudong, finance companies profile business areas.
biggest contributors accounting for 38%.
Our view is that the new initiatives will lead
to further increased office demand from the About the author
finance sector, even in the short term. Cathy Huang is a Senior Manager focusing on Shanghai office market
research. She authors market analysis for JLL publications such as
We have already witnessed increased
the Property Digest and media release, as well as the subscriber-
demand in terms of leasing enquiries from
based Real Estate Intelligence Service. Cathy also authors consulting
two areas, both newly registered foreign
projects on behalf of investor and developer clients.
finance companies that are looking to11 – Features
Non-conventional use of space in Singapore
malls
It has been observed that non-conventional suburban malls that house public libraries ft city campus of private education institute
use of space is helping to prop up mall include White Sands, home to Pasir Ris PSB Academy, also on its third floor.
occupancy and boost foot traffic of late. Public Library and Northpoint City and
NEX, which accommodate Yishun Public By early 2019, One Raffles Place shopping
The integration of technology in retailing Library and Serangoon Public Library mall will launch a co-working space tenant
has gradually shaped consumers’ shopping respectively. In the CBD, Orchard Gateway called Spaces that will occupy 35,000 sq ft
behaviour. Specifically, the growing and Chinatown Point have library@Orchard across a few levels in the mall. Apart from
popularity and convenience of online and library@Chinatown, respectively, as hosting start-up companies, Spaces also
shopping is altering traditional shopping tenants. plans to host fashion and retail-related
patterns and contributing to the migration events within the mall.
from physical stores to the online platform. The proliferation of co-working in
This has resulted in a rise in retail vacancy Singapore in recent years has also led to a Creative deployment of retail space for
rates from 2014 through 2017 (as reflected growing number of co-working operators non-conventional use, combined with other
in the URA rental retail index) and raised — which typically occupy office spaces — leasing strategies and an improvement
oversupply concerns in Singapore. joining the retail tenant mix. In the CBD, in retailer and consumer sentiment, has
OUE Downtown Gallery houses a 24,000-sq- contributed to a noticeable stabilisation
Recognising the threat from technological ft flexible work space operation, run by The of vacancy rates in malls in 2018. This is
disruption, landlords have explored the use Work Project, amidst mostly conventional because non-conventional users generally
of retail space for non-conventional uses, retail shops, while China Square Central absorb sizeable volumes of vacant retail
particularly those offering a platform for has co-working tenant ClubCo in its tenant space. Besides offering a good networking
community gathering and networking such mix. and community-gathering platform, with
as public libraries, flexible work spaces and their relatively younger end-users, they
educational institutions. Recently, co-working operator JustCo also generate higher foot traffic and inject
started a 60,000 sq ft operation on the third vibrancy into the malls, which in turn
In recent years, an increasing number of floor of Marina Square to house more than benefits other retail tenants in the malls
malls, particularly suburban ones, have 1,000 members. The operation combines and overall performance of the malls.
added public libraries as tenants. While retail and co-working elements within the
the move is part of a government initiative premises and features a marketplace where Going forward, embracing non-
to make libraries more accessible to the members can showcase their products conventional uses in retail could be one of
public, landlords also benefit from bonus in complimentary booths. Additionally, the key strategies to help landlords adapt to
gross floor area at the mall. Notable Marina Square houses the new 100,000 sq changing shopping behaviour.
About the author
Angelia Phua is a Consulting Director for JLL, based in Singapore.
She guides a team of analysts in undertaking consultancy projects,
including real estate market studies, highest and best use studies
and planning studies. She oversees research in the retail sector in
Singapore and is involved in strategic research work.Proptech.
It’s changing our homes, work and cities.
Start-up funding for proptech in Asia Pacific
will reach US$4.5 billion in 2020.
How will it change your life?
We’ve done the research. Download
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access.jll.com/proptech-report-2017Office
Hong Kong
“Tight-vacancy
environment to continue
supporting rental growth
14 – Office
in the next 12 months.” Stage in Cycle
Rental Growth Y-O-Y sq ft per month,
Denis Ma, Head of Research,
8.1%
net effective on NLA Growth
Hong Kong HKD 126.8 Slowing
Financial Indices PRC demand slows down as tenant decentralisation gathers pace
• Net absorption amounted to just over 1 million sq ft in 3Q18, supported by
170
the realisation of pre-commitments in newly-completed buildings. Tenant
160 decentralisation remained a major trend with 54% of all new lettings in 3Q18
150 located outside of the city’s traditional core office markets.
140
• Despite PRC demand showing visible signs of slowing and the volume of new
130 lettings declining by 23% q-o-q, the Central office market continued to attract
Index
120 a bevy of new set-ups and expansion requirements from the banking and
110 professional services sectors.
100
Hutchison House redevelopment to be completed in 2023
90
• CK Asset has set the redevelopment of Hutchison House in motion, issuing
80
4Q14 4Q15 4Q16 4Q17 4Q18 4Q19
eviction notices to tenants requesting offices to be vacated by the end of
Rental Value Index Capital Value Index January 2019. Under the current plans, Hutchison House will be redeveloped
into a 41-storey building providing up to 493,500 sq ft of commercial space with
Arrows indicate 12-month outlook completion anticipated in 2023.
Index base: 4Q14= 100
Financial Indicators are for Central. • Swire Properties’ South Island Place in Wong Chuk Hang and One Taikoo Place
Source: JLL
in Quarry Bay were issued with occupation permits in 3Q18, adding 1.1 million
sq ft of Grade A office stock to the leasing market.
Physical Indicators
Investment market loses momentum
350 6 • Rents in the overall market grew by 2.5% q-o-q in 3Q18. Growth moderated
300 across the market except in Wanchai/Causeway Bay where rental growth
5
gathered pace due to a tight-vacancy environment.
250
4 • The investment market continued to be highlighted by record-breaking
Thousand sqm
200
Percent
150 3
transactions, although the investment volume of properties priced over USD 5
million plummeted by 77% q-o-q amid increasing economic uncertainties and
100
2 rising interest rates.
50
0
1 Outlook: Investment yields to stabilise over the near term
-50 0 • Strong levels of pre-leasing in upcoming new office developments are likely to
14 15 16 17 18F 19F keep vacancy rates tethered to their current low levels over the next 12 months.
Take-up (net) Completions This should help offset any slowdown in leasing demand and provide support
Future Supply Vacancy Rate for rents to drift higher by 5-10% in 2018, and at a slower pace of 0-5% in 2019.
For 2014 to 2017, take-up, completions and vacancy rates are year-end • With further interest rate hikes looming, investment yields in Hong Kong should
annual. For 2018, take-up, completions and vacancy rate are YTD, while
future supply is for 4Q18. stabilise over the next 12 months. Still, capital values are forecast to grow in the
Physical Indicators are for the overall market. range of 10-15% in 2018 before easing to 0-5% in 2019.
Source: JLL
Note: Hong Kong Office refers to Hong Kong’s overall Grade A office market.Beijing
“CBD Core Area project
delays are keeping vacancy
low and pushing up
15 – Office
Stage in Cycle
rents citywide.”
Rental Growth Y-O-Y sqm per month,
4.2%
net effective on GFA Growth Mi Yang, Acting Head of Research,
RMB 401 Slowing Beijing
IT demand strong; landlords more selective with tenants Financial Indices
• IT tenants continued to be active; a major IT player quickly absorbed space 150
which was returned by a start-up, forced to reconsider its business plan.
Finance remained a key source of demand, and some landlords leveraged this 140
to sign funds with very high rental affordability. 130
• In the tight-vacancy environment, landlords benefitted from waiting lists of 120
Index
tenants and mostly preferred to accept SOE-backed companies and industry
giants, considering them to be less risky. 110
100
Small project comes online near centre of Beijing
• New supply was limited, with just COFCO Landmark (45,756 sqm) in Ditan 90
opening in the quarter. Leasing progress was off to a strong start, with an 80
environmental firm taking up significant space in the building. 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19
Rental Value Index Capital Value Index
• Stable demand kept the overall vacancy rate low at 3.2%. Olympic Area and
Third Embassy recorded the largest declines in vacancy in the quarter. While Arrows indicate 12-month outlook
Index base: 4Q14 = 100
the low-vacancy environment will continue to limit net absorption, large Financial Indicators are for the CBD.
requirements will be satisfied as space becomes available. Source: JLL
Rents climb in tight market
• Benefitting from the lack of available space in the market, all submarkets Physical Indicators
recorded positive rental growth for a second consecutive quarter, with Third
800 8
Embassy, Zhongguancun, and Wangjing leading the rise.
700 7
• No major en-bloc deals were recorded in the quarter, but as monetary
600 6
policies tighten nationwide, we expect to see more opportunities come to
Thousand sqm
500 5
the market. Sellers under greater financial pressure are likely to market more Percent
reasonable prices. 400 4
300 3
Outlook: First CBD Core Area buildings set to open by 2019
200 2
• Following delays to CBD Core Area projects, new buildings are expected to
100 1
come online in 2019 and offer some relief to tenants in the tight-vacancy
market. Nearby landlords should be better-positioned to increase rents 0 0
14 15 16 17 18F 19F
through end-2018, before CBD Core Area landlords implement more Take-up (net) Completions
aggressive pre-leasing strategies closer to their opening dates. Future Supply Vacancy Rate
• The remaining majority of new supply is located in emerging Lize; the area will For 2014 to 2017, take-up, completions and vacancy rates are year-end
have the capacity to fulfil large requirements for space. annual. For 2018, take-up, completions and vacancy rate are YTD, while
future supply is for 4Q18.
Physical Indicators are for the overall market.
Source: JLL
Note: Beijing Office refers to Beijing’s overall Grade A office market.Shanghai
“Strong demand from financial
services and TMT companies
fuels steady rental growth.”
16 – Office
sqm per day, Stage in Cycle
Daniel Yao, Head of Research, Rental Growth Y-O-Y
China 0.7%
net effective on GFA Rents
RMB 10.4 Rising
Financial Indices Financial services, TMT, and co-working firms lead demand
140
• In the Pudong CBD, a few SOEs committed to large spaces for consolidation
and upgrade purposes in 3Q18. In the Puxi CBD, tech and media companies
130 continued to look for upgrade and expansion opportunities. Co-working
operators also sought space for expansion, while developers were investing in
120 their own co-working brands as well.
Index
110 • The decentralised market continued to see strong leasing momentum.
Submarkets like Hongqiao Transportation Hub, Xuhui Bund, and Qiantan
100 outperformed thanks to their strong positioning and industry targeting.
90 Three projects add 173,000 sqm to the Grade A market
• Taikang Insurance Tower in the Pudong CBD, ITC Phase 2 T1 in the Puxi CBD, and
80
4Q14 4Q15 4Q16 4Q17 4Q18 4Q19
World Trade Centre Phase 3 in Pudong’s decentralised market reached completion.
Rental Value Index Capital Value Index • Pudong CBD vacancy increased 0.6 percentage points q-o-q to 11.1%. Puxi CBD
Arrows indicate 12-month outlook vacancy improved 2.2 percentage points q-o-q to 8.7%. Grade A buildings that
Index base: 4Q14 = 100 lost tenants due to decentralisation have gradually attracted new occupants.
Financial Indicators are for the CBD. Decentralised vacancy improved 2.2 percentage points to 23.9% as new
Source: JLL
buildings continued to attract upgraders.
Rents strengthen in the Puxi CBD as vacancy improves
Physical Indicators
• Falling vacancy has boosted sentiment for Puxi CBD landlords, allowing
700 12 rents there to increase 1.2% q-o-q to RMB 9.7 per sqm per day. In the Pudong
CBD, rents increased by a moderate 0.5% q-o-q. In the decentralised market,
600 10 continued large supply held rental growth to moderate levels.
500
8 • The tight financing environment continued to impact domestic investor activity,
Thousand sqm
400 though some SOEs continued to seek headquarter locations. Foreign investors
Percent
6
300
such as developers, real estate funds, and pension funds continued to explore
4 opportunities. Notable deals this quarter included the transactions of Bay Valley
200 and Longyu International Plaza.
100 2
Outlook: New demand to support growth in emerging areas
0 0
14 15 16 17 18F 19F • Shanghai’s government is expected to continue pushing the opening-up
Take-up (net) Completions initiatives that were announced in July, covering financial services, trade,
Future Supply Vacancy Rate technology, and other sectors. Such initiatives are expected to translate to
office demand; for example, the recent World AI Conference helped boost
For 2014 to 2017, take-up, completions and vacancy rates are year-end demand for offices in the Xuhui Bund area, where the event was held.
annual. For 2018, take-up, completions and vacancy rate are YTD, while
future supply is for 4Q18.
Physical Indicators are for the CBD. • Rents are likely to strengthen in core areas as supply becomes more limited,
Source: JLL especially in the Pudong CBD. In the decentralised market, several submarkets
are expected to mature quickly, although overall decentralised rent growth is
likely to remain constrained by continued large supply.
Note: Shanghai Office refers to Shanghai’s overall Grade A office market, consisting of Pudong, Puxi and
decentralised areas.Shenzhen
“Tech firms require more
space and better facilities
as business volume and
17 – Office
Stage in Cycle
headcount increase.”
Rental Growth Y-O-Y sqm per month,
2.5%
net effective on GFA Rents Silvia Zeng, Head of Research,
RMB 286 Stable South China
Significant expansion demand by high-tech firms Financial Indices
• Demand for Grade A office space has been mainly for recently completed and 120
high-quality office buildings in Futian and Nanshan District. Large-scale high-
115
tech firms and co-working operators have been actively looking for space for
expansion, such as a Shenzhen-based tech company which leased 15,000 sqm in 110
Nanshan. 105
Index
• Nonetheless, vacancy in Futian District edged up due to the eviction of peer-to- 100
peer lending (P2P) firms by the government, especially in strata-title buildings. 95
Liquidity issues have seen regulators closely monitor and impose strict controls
90
on P2P firms.
85
Improving occupancy in Nanshan 80
• There was only one Grade A project completed in 3Q18, adding about 40,000 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19
sqm to the market. Located in Nanshan District, the whole property was Rental Value Index Capital Value Index
purchased by Bank of Beijing in 2017, for its regional headquarters. Arrows indicate 12-month outlook
Index base: 4Q14 = 100
• The overall vacancy rate declined by 30 basis points q-o-q in 3Q18. This was Financial Indicators are for Futian.
owing to outstanding absorption in Nanshan District, as high-tech firms were Source: JLL
active in their search for office space.
Rents edge up; investment market remains active Physical Indicators
• Influenced by higher vacancy due to P2P withdrawals in Futian, rental growth
2,500 25
was limited. Rents in Nanshan performed well, though overall rents edged up
only by 0.7% q-o-q. High-quality properties in core areas were still favoured by
2,000 20
companies.
Thousand sqm
• The investment market remained active, due to sustained optimism about 1,500 15 Percent
Shenzhen from institutional investors. There were also enquiries from occupiers
for self-use space. One en-bloc transaction was recorded in the quarter. 1,000 10
Landlords with a residential focus were more willing to sell due to tight liquidity.
500 5
Outlook: Supply-demand mismatch to impact rental growth
0 0
• The local economy should maintain a positive performance but risks have risen 14 15 16 17 18F 19F
due to external political and economic pressures. Many landlords are being Take-up (net) Completions
more cautious about tenant selection, putting greater emphasis on tenant Future Supply Vacancy Rate
quality over higher rents.
For 2014 to 2017, take-up, completions and vacancy rates are year-end
• Office leasing is expected to remain firm with high-tech and traditional financial annual. For 2018, take-up, completions and vacancy rates are YTD, while
future supply is for 4Q18.
firms still the main demand drivers. However, an abundance of supply is Physical Indicators are for the overall market.
anticipated to come online over the next 12 months, which is likely to put Source: JLL
upward pressure on vacancy and impact rental growth.
Note: Shenzhen Office refers to Shenzhen’s overall Grade A office market.Taipei
“Robust leasing demand
while investment activity
18 – Office
remains moderate.”
ping per month, Stage in Cycle
Jamie Chang, Head of Research, Rental Growth Y-O-Y
Taiwan
net on GFA Growth
3.0% NTD 3,206 Slowing
Financial Indices Relocations and upgrades continue to support demand
130 • Quarterly net take-up reached 18,200 ping, a record high when owner
occupation is excluded. Most new leases were signed by corporate tenants
looking to consolidate their operations, requiring large units, or upgrade to
120 space in new buildings. Space released by relocations also started receiving
leasing enquiries or lease commitments.
Index
110 • Net take-up for the first three quarters this year was recorded at 41,600 ping
approaching the highest annual volume on record, largely due to the newly-
completed buildings drawing tenants.
100
One new addition to stock in 3Q18
90 • There was one new project completion, providing 10,700 ping of leasable space
4Q14 4Q15 4Q16 4Q17 4Q18 4Q19 in Dunhua North.
Rental Value Index Capital Value Index
• Although a new building has been released this quarter, robust demand
Arrows indicate 12-month outlook continued, pushing the overall vacancy rate downwards by 1.2 percentage
Index base: 4Q14 = 100
Financial Indicators are for Xinyi. points q-o-q to 6.9%.
Source: JLL
Decreasing vacancy supports rent growth
• New completions with decreasing vacant space further supported rents, and
Physical Indicators leases signed in the newly-completed buildings pushed the overall rent to
increase by nearly 2% y-o-y to NTD 2,695 per ping per month, the highest value
200 12
since 2001.
180
10
160 • Quarterly investment activity continued to be dominated by corporate investors
140
8 acquiring industrial facilities for self-occupation. However, a large en-bloc office
Thousand sqm
120 tower transaction pushed the overall direct investment volume to NTD 12.1
Percent
100 6 billion, a decrease of 40% y-o-y.
80
60 4 Outlook: Market prospects remain positive for 2018
40 2 • The new supply volume is expected to peak in 2018, with no large-scale
20 completions in the short term. In this scenario, when expansion of space is
0 0
14 15 16 17 18F 19F
not possible in current buildings, tenants tend to seek availability in new and
Take-up (net) Completions upcoming projects. For this reason, several projects that are currently under
Future Supply Vacancy Rate construction have reached commitment rates of 50% or above.
For 2014 to 2017, take-up, completions and vacancy rates are year-end • Institutional investors are likely to remain observant but actively seek direct
annual. For 2018, take-up, completions and vacancy rate are YTD, while investment opportunities in commercial real estate, while evaluating the
future supply is for 4Q18.
Physical Indicators are for the overall market. feasibility of public projects and other alternative property sectors. All levels of the
Source: JLL Taiwanese government have launched, and are expected to continue to launch,
various public-and-private projects totalling NTD 200 billion. Domestic funds
remain abundant while investors are active in seeking channels to funnel funds.
Note: Taipei Office refers to Taipei’s overall Grade A office market.Tokyo
“Occupational demand
maintains strength; investor
19 – Office
interest remains strong.”
tsubo per month, Stage in Cycle
Rental Growth Y-O-Y Takeshi Akagi, Head of Research,
gross on NLA Growth Japan
2.9% JPY 37,660 Slowing
Net absorption soars Financial Indices
• According to the Tankan Survey in September, the business sentiment index 150
of large manufacturers was 19 points, 2 points lower q-o-q. This was the third
consecutive quarter of decline. The business sentiment index of large non- 140
manufacturers also declined by 2, to 22 points, marking the first decrease in
eight quarters, largely due to trade friction and natural disasters. 130
Index
• Net absorption in 3Q18 totalled 295,000 sqm, the second straight quarter above 120
200,000 sqm. Net take-up during the first three quarters totalled 599,000 sqm,
the second highest level on record. This has been a reflection of the absorption 110
of new supply and continued expansion demand, coming from sectors including
information and communication, manufacturing and financial services. 100
Vacancy rate further decreases 90
4Q14 4Q15 4Q16 4Q17 4Q18 4Q19
• New supply totalled 259,000 sqm in 3Q18, increasing total stock by 3% q-o-q Rental Value Index Capital Value Index
and 7% y-o-y. With limited available space for lease in existing buildings,
Arrows indicate 12-month outlook
occupiers have been committing to upcoming supply. Much of the space Index base: 4Q14 = 100
expected to enter the market through end-2019 has already been leased. Source: JLL
• The vacancy rate stood at 1.5% at end-3Q18, decreasing 50 bps q-o-q and
140 bps y-o-y. The vacancy rate tightened throughout the CBD in spite of the
relatively major supply, in particular in Akasaka/Roppongi and Otemachi/ Physical Indicators
Marunouchi.
700 5
Rent and capital value growth accelerates
600
• Rents averaged JPY 37,660 per tsubo per month at end-3Q18, increasing 1.5% q-o-q 4
and 2.9% y-o-y. This marked the 26th straight quarter of growth and it was 500
Thousand sqm
particularly strong this quarter in Shinjuku. 400 3 Percent
• Capital values increased 4.8% q-o-q and 5.7% y-o-y at end-3Q18. Growth was 300 2
driven by accelerating rent growth and cap rate compression. A notable sales
200
transaction was Hulic’s acquisition of a stake in Shinagawa Season Terrace for 1
JPY 61 billion or at an estimated NOI cap rate of 3.6%. 100
0 0
Outlook: Capital values to grow moderately 14 15 16 17 18F 19F
• According to Oxford Economics, Japan’s real GDP is forecast to grow by 1.1% in Take-up (net) Completions
2018 while CPI is likely to rise 1.1% in 2019. Rising trade tensions remain a major Future Supply Vacancy Rate
downside risk.
For 2014 to 2017, take-up, completions and vacancy rates are year-end
annual. For 2018, take-up, completions and vacancy rate are YTD,
• With robust demand expected to persist and strong pre-commitments to while future supply is for 4Q18.
upcoming supply, we now expect the vacancy rate rise to be more moderate. Source: JLL
As a result, rents are likely to hold relatively stable. Capital values should see
moderate growth.
Note: Tokyo Office refers to Tokyo’s overall Grade A office market.Osaka
“Limited supply
supports rent growth;
stronger activity in the
20 – Office
investment market.” Stage in Cycle
Rental Growth Y-O-Y tsubo per month,
Yuto Ohigashi, Director - Research,
11.0%
gross on NLA Rents
Japan JPY 20,267 Rising
Financial Indices Robust demand continues
240 • According to the September Tankan Survey for Greater Osaka, the business
sentiment index for large manufacturers was 14 points, decreasing by 4 points
220
q-o-q. That for non-manufacturers was 27 points, decreasing 2 points q-o-q.
200 This reflected the impacts of the natural disasters on exports, production and
180 inbound tourism, as well as that of the macroeconomic policy in the U.S. on
Index
corporate sentiment. A tight labour market continued, with unemployment at
160
3.0% in 3Q18.
140
• Net absorption totalled 30,000 sqm in 3Q18, posting a healthy figure due largely
120
to new supply, after remaining sluggish for three quarters on the back of limited
100 supply. Robust demand persisted from real estate, professional services and
80 manufacturing sectors.
4Q14 4Q15 4Q16 4Q17 4Q18 4Q19
Rental Value Index Capital Value Index Vacancy hovers around 1%
Arrows indicate 12-month outlook • Total stock increased by 2% q-o-q and 2% y-o-y, as Namba Skyo (NLA 35,000 sqm)
Index base: 4Q14 = 100 entered the market. Occupiers include WeWork, Asahi Intelligence Service and
Source: JLL
Mory Industries Maruichi Steel Tube.
• The vacancy rate stood at 1.1% at end-3Q18, increasing 30 bps q-o-q and
decreasing 60 bps y-o-y. The quarterly increase followed seven straight quarters
Physical Indicators of decline.
160 9 Capital value growth accelerates
140 8
• Rents averaged JPY 20,267 per tsubo per month at end-3Q18, increasing 2.0% q-o-q
7
120 and 11.0% y-o-y. Rental growth was recorded for the 17th straight quarter,
6
albeit at a slower pace. Rents moved above JPY 20,000 per tsubo per month
Thousand sqm
100
Percent
5 for the first time since 1Q09. Double-digit growth was recorded for the second
80
4 consecutive quarter.
60
3
40 • Capital values grew 7.5% q-o-q and 27.5% y-o-y at end-3Q18. This was the 20th
2
20
straight quarter of growth, reflecting a rental increase and cap rate compression.
1
0 0 Outlook: Rent and capital value growth momentum to continue
14 15 16 17 18F 19F
Take-up (net) Completions • According to Oxford Economics, the growth forecast for Osaka in 2018 is 0.2% and
Future Supply Vacancy Rate 2019 is 0.4%. Heightened economic and financial market uncertainty along with
lingering disruptions caused by the typhoon present risks to the growth outlook.
For 2014 to 2017, take-up, completions and vacancy rates are year-end
annual. For 2018, take-up, completions and vacancy rate are YTD, while • Occupational demand is expected to remain robust while new supply is
future supply is for 4Q18.
Source: JLL expected to remain extremely limited, with no completions in the pipeline for
2019. As such, the vacancy rate is forecast to decrease further and drive further
rent growth momentum. Capital values should also rise, on the back of rent
growth and with further compression of cap rates probable.
Note: Osaka Office refers to Osaka’s 2-Ku’s Grade A office market.Seoul
“Positive leasing activity
across submarkets leads to
21 – Office
strong net absorption.”
pyung per month, Stage in Cycle
Rental Growth Y-O-Y Sungmin Park, Head of Research,
0.0%
net effective on GFA Rents Korea
KRW 92,481 Stable
Demand levels remain robust for all three business districts Financial Indices
• Overall net absorption stood at 32,300 pyung—the highest level since 4Q16— 120
on the back of large tenants moving in as well as sustained positive leasing
demand for all major business districts. The largest lease in the quarter was at
Gran Seoul in the CBD, where SK including its affiliates SK E&S and
SK Innovation took up 4,300 pyung. 110
Index
• Demand for prime office space in Yeouido continued. Take up occurred at a
brisk pace, aided by attractive incentives at IFC and FKI Tower. Major leases
during the quarter included MMC (1,585 pyung), P&G (1,000 pyung), 100
and ANZ (553 pyung) into Three IFC. Gangnam’s demand was also positive on
the back of decent take up at ASEM Tower, Gangnam N Tower, and Arc Place.
90
Despite strong demand, influx of stock pushes up vacancy 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19
• Seoul’s overall vacancy increased about 70 bps q-o-q to 13.1% with new stock Rental Value Index Capital Value Index
arrivals. Yeouido saw the largest take-up aided by large scale move ins at IFC Arrows indicate 12-month outlook
and FKI Tower—KB Asset Management (2,000 pyung), Aramco Korea Index base: 4Q14 = 100
(554 pyung) into Three IFC and KB Bank (5,000 pyung) into FKI Tower. Financial Indicators are for the CBD.
Source: JLL
• Centropolis (GFA 37,122 pyung) in the CBD and Gangnam N Tower
(GFA 12,562 pyung) in Gangnam completed in 3Q18. No space was taken in
Centroplis, although Korbit and Lotte’s new co-working company have leased Physical Indicators
space in Gangnam N Tower.
300 14
Sale of Samsung C&T Tower sets record high price per pyung 250 12
• Rents increased 1.4% q-o-q as incentives finally showed some contraction at 10
200
major buildings across business districts. On a like-for-like basis, Yeouido rents
Thousand sqm
8 Percent
outgrew Gangnam and the CBD, posting a 0.9% increase q-o-q. 150
6
• Samsung C&T Tower (GFA 18,360 pyung) in Gangnam was concluded as the 100
largest deal during the quarter, which traded from Samsung C&T to Koramco 4
for KRW 748.4 billion, a record high price per pyung of KRW 30.5 million. 50 2
Outlook: Net absorption and rental growth to improve further 0 0
14 15 16 17 18F 19F
• Seoul’s net absorption is expected to remain on track driven by new Grade A Take-up (net) Completions
stock additions in the CBD and Gangnam. This is expected to result in relocation Future Supply Vacancy Rate
and upgrade activity, aided by high incentive packages offered to prospective
For 2014 to 2017, take-up, completions and vacancy rates are year-end
tenants. The recent pick up in Yeouido’s leasing demand and expansion of annual. For 2018, take-up, completions and vacancy rate are YTD, while
co-working companies are also likely to continue to bolster the leasing market. future supply is for 4Q18.
Physical Indicators are for the overall market.
• Rental growth is likely to show modest improvement but be limited by the Source: JLL
existing vacancy as well as new stock arrivals throughout 2018. Gangnam should
continue to outperform the other two markets with limited stock, along with
decent demand, underpinned by a strong business landscape of its key tenants.
Note: Seoul Office refers to Seoul’s overall Grade A office market.You can also read
