Bangalore and Hyderabad should be the two fastest growing Asian cities over 2020-24

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Most Asian markets have slowed, but growth in China and India is still high and the outlook for China is now improving. Despite recent positive news, we think trade tension between China and the US will persist. The growth in Asia is driven by cities as much as countries. Bangalore and Hyderabad in India should be Asia’s fastest and third fastest-growing cities respectively over 2020-24. In India, besides Bangalore offices, we recommend developers continue to expand in logistics by collaborating with corporate and government bodies owning land banks. “Among Asian emerging markets, India has been pushing interest rates downwards. Persistent very low or negative real interest rates in Asia should help lift confidence among major occupiers to recover after a generally difficult 2019. At the same time, property investors and developers can expect funding costs to remain very modest. This situation should support demand for investment in property in most Asian markets”, says Sankey Prasad, Managing Director and Chairman at Colliers International India. Office sector: Top locations remain resilient In the office sector, while performance and outlook vary widely across markets, we continue to see Hong Kong, Singapore, Tokyo and Shanghai as the top locations in Asia for occupiers on socio-economic, property and human factors. Looking ahead, Bangalore, Manila and Singapore should see average rent growth of over 3% over three to five years, though Singapore faces consolidation over 2020-2021. Investment markets: Big city grit Over the first nine months of 2019, aggregate investment volume in Asian property markets declined by 13%, from USD100.5 billion to USD87.3 billion. The ten largest urban property markets showed a smaller decline of 3%, from USD71.3 billion to USD69.3 billion. We see this outcome as surprisingly robust in the light of general economic slowdown, increased uncertainty from US-China trade tensions, and the protests in Hong Kong. In 2018, investment property transaction volume totalled a record high of USD133.9 billion. For 2019, we now assume that total investment dropped by 10%, to USD120.5 billion. We assume that investment volume in the ten largest urban markets declined by a smaller 2-5%. For 2020, we anticipate economic weakness but not full recession and persistent very low interest rates. We believe that investment activity can continue to advance, and predict a 7% increase to USD129.0 billion. Logistics/industrial sector and data centres: Higher returns, but correct strategies vital In India, we recommend developers continue to expand in logistics by collaborating with corporate and government bodies owning land banks. Demand for data centres is surging due to the spread of cloud computing and 5G mobile, notably in China. Much investment is targeting this area despite high barriers to entry, but investors require adequate expertise to succeed. Flexible workspaces: Reinvention key to expansion Over 2017-2019, the two key sectors driving growth in leasing demand in Asia were technology/media and flexible workspace (i.e. operators of coworking spaces and serviced offices). Flexible workspace has actually grown fastest of all. We do not expect reduced demand from flexible workspace operators to constitute a significant new downward force on absorption of office space across Asia, though there may well be pressures in certain markets. Looking forward, we expect greater collaboration between landlords and flexible workspace operators. This will help enhance the tenant experience through ‘amenitisation’ and create an ideal environment for future growth in this segment.