The changing face of the region - urbanisation, population growth, commodity and manufactured goods production, and cost competitiveness in the services sector - are the key economic drivers for Asia Pacific to continue to outperform other regions, according to global real estate firm Jones Lang LaSalle. Inflows of capital from Asia and other parts of the world will continue to drive the Australian commercial market in 2012. homes
The Asia Pacific region's strong economic drivers are expected to continue to fuel commercial property markets across the region, fueled by rising consumer spending as well as rising urbanization and related housing needs.
Dr Jane Murray, Jones Lang LaSalle's Head of Research for Asia Pacific, outlined a range of compelling high-level developments that would shape Asia Pacific property markets and push growth forward at a recent research event in Sydney titled Top of the World: Australia's Position in the Asia Pacific Landscape.
Demands for housing and urbanization - Every year, 30 million people are added to the population of cities in Asia Pacific;
Because of the region's changing income, Asia Pacific will account for half of the world's middle class by 2020. (from its current level of 25 percent ). This will rise to 66 percent in 2030, equating to 3.2 billion consumers; four Asian Pacific countries will rank in the top ten globally in terms of middle-class consumption - China, India, Japan, and Indonesia; rising commodity and manufactured-goods exports are driving growth in the logistics sector, resulting in increased demand for industrial warehousing space; rising commodity and manufactured-goods exports are driving growth in the logistics sector, resulting in increased demand for industrial warehousing space;
Asia Pacific now has eight of the top ten container ports in the world.
Asia Pacific economies are moving up the value chain, with rapid expansion in the service sector; Asia Pacific produces 15 million new graduates each year, nearly three times the number in the United States and Western Europe; this new workforce, which includes bankers and lawyers, would need offices to work in, and as a result, we are seeing an explosion in office stock in Asia Pacific.
"The size of population growth and urbanisation is immense," Dr. Murray tells the World Property Channel. If you assume that each individual needs 30 square meters of living space, Asia Pacific would need the equivalent of 45,000 Empire State Buildings over the next ten years to accommodate the additional people who will be living in cities. The area of Grade A office space in Asia Pacific has grown from 15 million square meters to 70 million square meters in the last 20 years. Over the next four years, an additional 35 million square metres of Grade A stock will be added.
"At the same time, the region has experienced strong demand for space, especially since the Great Recession." We anticipate a record level of net absorption this year, thanks in large part to the rapidly rising markets of China and India. The Asia Pacific economy is expected to continue to outperform the rest of the world next year, growing at a rate of about 5.5 percent in aggregate, with many emerging economies growing at rates of 6 to 8%. As a result, continued demand for space is anticipated, but we are likely to see a slowdown from this year's record levels.
"For most office markets in Asia Pacific, we are currently predicting more rises in rents and capital values of between 5% and 10% in 2012," said Dr Murray.
Australia is a country that has a
Australia's economy is expected to expand at a faster rate in 2012, from 1.7 percent this year to 3.4 percent.
Dr David Rees, Jones Lang LaSalle's Australasian Head of Research, said Australia was well placed as a desirable investment destination.
"Australia is lucky in that it can benefit from two big flows in the Asia Pacific region. We're on a two-way path, sending commodities to Asia while also receiving high capital inflows from rising foreign investment levels. Capital flows into Asia are complementary to commodity flows.
Both of these flows influence the real estate market in various ways. Commodity exports boost economic growth by driving demand for office and industrial space, which in turn stimulates consumer spending both directly and indirectly. "The inflows of capital are finding their way into real estate investment and growth. Australia ranked fourth in the Asia Pacific region for commercial real estate investment volumes in Q3 and the nine months to September, behind Japan, Hong Kong, and China.
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For the first nine months of 2011, foreign buyers accounted for one-third of all transactions in Australia (over AUD 5 million). This is by far the highest percentage ever. In 2010, the previous high was 24 percent.
"Capital inflows have been synchronized with exchange rate patterns." Despite a propensity to concentrate on this measure, the US Dollar is no longer the main game. A large portion of investment has come from countries where the exchange rate is much higher than the Australian Dollar. Canada, Switzerland, and a number of Asian countries are among them. For decades, Asia has been a major source of investment into Australia's real estate markets, but the source of funds has shifted. Japan was a major investor in the local market in the late 1980s and early 1990s. Singapore, China, and South Korea have recently gained prominence.
"Foreign investors are setting the pace and the price, and we don't expect that to change as long as the incentives to invest in Australia are as high as they are." Because of its strong and stable economy, relatively high property yields by global standards, highly open and mature property sector, and supply/demand balance in office markets, Australia is attracting foreign capital. According to Dr. Rees, "the majority of these drivers are likely to continue into 2012."