Savills : announces Asia Pacific Investment Quarterly Q3 2017

Asia Pacific highlights

Japan's macro economy remains strong. Office rental growth has been robust in the face of heavy supply, and pre-leasing for large new projects is proceeding much better than originally expected. PM Abe's victory in an October snap election is supporting current market momentum.

In Singapore, the enthusiasm of developers to replenish their residential land banks and the continued hunger for large investible grade commercial assets drove investment sales numbers towards levels not seen since 2013.

Even at historically rich valuations, Hong Kong's office market is extremely active while investors in the retail market are waiting for clearer signs of a turnaround before committing.

Investment activity in Korea continues to thrive despite the geopolitical headwinds and the economy grew at its fastest rate in more than seven years in the third quarter, which could be a factor in the central bank deciding to raise interest rates soon.

In China, developers and investors are exploring multifamily development opportunities as the government changes tack on the residential affordability issue.

Vietnam

In Q3/2017, Vietnam continued to see strong interest from developers for large scale mixed-use projects with a residential component in major cities. In September, VinaLand Limited, the real estate investment fund by Vietnam-based asset manager VinaCapital, transferred their stake in VinaSquare, a mixed use 3.1-hectare development site, in a prime District 5 location in Ho Chi Minh City, which they had acquired around a decade ago, to Tri Duc Real Estate for a total consideration of US$41.2 million. In addition, their 182-hectare My Gia Project, one of the largest township projects in Nha Trang, Central Vietnam, also changed hands for over US$11 million from VinaLand to a local developer.

In August, Anpha Holdings, a Vietnamese real estate development firm, acquired Novaland's 99.98% stake in Nova Galaxy, a subsidiary of the listed developer. Galaxy 9 project, located in District 4, Ho Chi Minh City with over 500 apartments, is part of this recently acquired company.

In Hanoi, Growing Sun Investment picked up the prime 4.2-hectare Diamond Rice Flower complex project from Kinh Bac City Group, a well-known listed company. Similarly, FLC Group, won the bid for the land use rights of the 6.4-hectare DM1 land plot, located in Nam Tu Liem District, for nearly US$38 million, to build townhouses, villas and apartments.

The overall Vietnam property market is trending upward, across all sectors, with a particularly positive outlook for the office market. Despite an 8% increase YoY in new supply, Ho Chi Minh City continued its robust trend with high average occupancy at approximately 95% and average grade A rents up 8% YoY. Hanoi has also started to catch up with significant improvements in net effective rents and occupancy rates for Grade A and B buildings. The total office stock in Hanoi was approximately 1.6 million sqm with occupancy rates at 93%, an increase of 6% YoY. Market rental rates for both Grade A and Grade B have increased slightly at approximately 2% and 9% QoQ respectively. With continued strong demand on the back of healthy FDI and robust GDP growth, we expect to see an extremely low vacancy rate across all office grades and an average rental growth of approximately 8.4% per annum in the next three years.