India and China possess the highest office space demand in Asia-Pacific region
Economies of the Asia-Pacific belt prolongs to outpace other regions of the globe, whose growth prospects over the first half of 2013, have considerably weakened. The impact of this is conspicuously visible on the demand for real estate within the two biggest economies of the region.In the Asia Pacific region, having the biggest future supply of office space China and India stand out. As per the markets review conducted by internationally renowned real estate analysts, both these regions are set to view a supply varying between two to four million square meters till 2015.
In accordance with the report, in Asia Pacific, despite a slowdown in prime office occupier markets Mumbai, New Delhi and Bangalore are among the top destinations with future office supply amounting around three million square meters.
Even though the economy of India is struggling, it is still growing at a faster rate as compared to 2012. The office markets have displayed solid net absorption. With the significant new supply which is expected to come online over the next thirty six months, rents have moved sideways and this trend is expected to continue.
While in China, the general slump in the economy has trickled down to the office market, where over the first half of 2013 prime rents declined in Guangzhou, Beijing and Shanghai.
While Shanghai over the past decade has proved to be the biggest market in terms of net absorption, questions pertaining to the capability of developers to fulfill local demand without allowing an oversupplied situation within specific localities to be created are being raised due to the considerable supply within the pipeline.
Accredited to its ability of hedging against inflation as well as its income appeal real estate continues to be an attractive option. Over the first six months of 2013, prime yields have been compressed across almost all markets as limited stock is being chased by significant capital. Within majority of markets, the secondary yields wherein tenancy risk is regarded more important have remained stable. Within Asia Pacific, Mumbai, Bangalore and Delhi emerged as the top destinations having prime office yields close to ten per cent.
As far as the Indian economy which is presently running a high current account as well as fiscal deficit along with a forecast for a comparatively slower growth within 2013 is considered; investors perception continue to be cautious. While high cost of funds, weak consumer demand and regulatory hurdles might serve as impediments within the way of investments in the realty sector, dynamics of city-level markets would be the ultimate factor in determining the way ahead.
