For the APAC region (in aggregate), office capital values experienced a strong uplift over the past decade. By the end of 2010, the APAC office capital value index surpassed that of mid-2008 (the pre GFC peak) and has been on a fairly consistent upward trend since then (CBRE 2019 Q2). However, rental values, have taken much longer to recover and indeed may only surpass their pre GFC peak this year. But this regional average disguises some highly divergent metro level trends: strong rental uplift in Tier 1 Chinese cities, Hong Kong, Sydney and Melbourne has been recorded but with weaker performances from Seoul, Perth, and Tier 2 Chinese cities. Major Japanese office market rents have recovered well in the past five years but had fallen considerably during and after the GFC.
Data points through end of August 2019. Change represents month-over-month change.
In contrast to many of the other major office markets in the region, Seoul has not enjoyed much of an occupancy recovery in recent years. The tight conditions just prior to the GFC triggered commencements for a wave of new office supply in all three of its business districts which delivered in the demand-challenged, post-GFC era. But new construction failed to pull back to allow a recovery in Seoul. Thus, overall vacancy moved up to double digit territory and has been stuck there for almost the past five years. This has increased leasing incentives and left effective rental growth flat or barely positive. But this hasn’t prevented interest in the sector from investors: last year USD 13 billion in Seoul office transactions took place – a new record (RCA).
Please note that the content of this report is for informational purposes only and should not be viewed as investment advice or an offer or solicitation. Any opinions are solely those of the Strategy and Research Team of CBRE Global Investors and are subject to change without notice, and may not be consistent with market trends or future events. This research is based on current public information that we consider reliable, but we do not represent it as accurate, updated or complete, and it should not be relied on as such.
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