Q4_2012_Asia_Pacific_Industrial_MarketView

CAPITAL VALUES 10.6% y-o-y
DEMAND FOR LOGISTICS SPACE REMAINS REASONABLY FIRM BUT RENTS CONTINUE TO RECORD SLOW GROWTH
Hot Topics Economic growth in Asia Pacific slightly improves in Q4 2012 to 4.3% y-o-y, up from 4.1% y-o-y in Q3 2012, thanks mainly to a slight revival in growth in China and reduced concern over the Eurozone debt crisis and fiscal cliff in the United States Industrial activity in China and India records a modest gain in Q4 2012. Industrial production holds steady in Taiwan and South Korea but growth picks up visibly in Malaysia, Indonesia, and Thailand Beijing records strong rental growth of 5.4% q-o-q for logistics space due to sustained demand from e-commerce companies, third party logistics operators and trading companies, combined with a lack of available space Wellington registers the largest rental decline within the region as rents fall by 4.7% q-o-q. Weak demand coupled with competition from the ample supply of cheap secondary industrial space prompts landlords to soften The CBRE Asia Pacific Industrial Capital Value Index increases by 2.0% q-o-q during the period. However this was slower growth compared to the figure of 3.4% q-o-q recorded in Q3 2012 The CBRE Asia Pacific Logistic Rental Index recorded a minor increase of 1.0% q-o-q in Q4 2012 compared to 0.8% q-o-q in Q3 2012 as rental growth stabilised for a second consecutive quarter, indicating that rents may be approaching their peak. Growth in China remained strong but very few rental increases were observed in Pacific markets, aside from Sydney. Q4 2012 saw steady demand from ecommerce operators, retailers and 3PL firms. Demand for high quality large units held firm during the period. Industrial space - especially in major markets such as Beijing, Hong Kong and Perth – remained tightly held and continued to inhibit major transactions. The bulk of leasing transactions involved small to medium sized spaces although the average size of deals was comparatively larger on a q-o-q basis, particularly in Guangzhou and Greater Tokyo. Chart 1: Key Economic Indicators The outlook for the Asia Pacific logistics and warehouse sector in 2013 remains positive despite a drop in demand as supply will continue to remain limited. Rental growth in many key markets in Asia will largely depend on the future performance of retailers that have experienced explosive growth over the last two years. In the Pacific overall leasing demand is expected to soften and landlords will be forced to provide more incentives and show greater flexibility despite solid demand for good quality assets. The lack of supply of large modern logistics facilities in prime locations did not improve during Q4 2012 and the period saw only a limited volume of new completions. The shortage of new supply will not be resolved in the short term unless governments in Asia release more land for industrial usage or the lending environment improves in the Pacific.



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Source: Oxford Economics
© 2013, CBRE, Group Inc.
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Asia Pacific Industrial & Logistics MarketView
Q4 2012 CBRE Global Research and Consulting
Q4 GDP 4.3% y-o-y
Q4 INDUSTRIAL PRODUCTION 3.7% y-o-y
RENTS 4.9% y-o-y
2008
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2012
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ECONOMIC UPDATE
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New Zealand
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Source: Oxford Economics
Chart 3 10 -10 -30 2001 Q3 -50 Asia-Pacific Japan 2002 Q3 2003 Q3 2004 Q3 2005 Q3 2006 Q3 China South-East Asia 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 Japan 2012 Q3 World Singapore Asia Pacific
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Industrial activity in China and India recorded a modest improvement in Q4 2012, bringing an end to the decline witnessed over the past three quarters. Industrial production held steady in Taiwan and South Korea but growth picked up visibly in other markets including Malaysia, Indonesia, and Thailand. PMI readings towards the end of 2012 showed signs of improvement - albeit very weak ones - for Asian manufacturers. South Korea and Taiwan both recorded slight gains but Australia continued to struggle due to the strength of the dollar which is eroding the external competitiveness of the country’s manufacturing sector. Merchandise export growth for the region as a whole staged a mild upturn during the period, mainly driven by the uptick of exports from China and recovery of intra-regional trade in Southeast Asia. Although regional exports have displayed some resilience most countries continue to suffer from weak demand from the United States and Eurozone. Despite the slight uplift in regional economic growth in Q4 2012 the economic situation in the United States and Eurozone will continue to weigh on sentiment and dampen prospects of a significant upturn. Most Asia Pacific markets, especially more open economies including Hong Kong, Singapore, Taiwan and South Korea, look set to face another challenging year. Southeast Asian economies (excluding Singapore) are expected to fare comparatively better as strong domestic consumption and favourable demographic growth will party offset part the impact of weaker external demand. Growth in China is expected to be stable as the government attempts to strike a balance between maintaining economic growth and keeping the residential property market and inflation in check.