Asia Pacific real estate market update April 2022


Regional Overview

Economic environment weakens, but many property markets show resilience

The macroeconomic situation has weakened further over the past month. Prospects for global stagflation have increased following the start of interest rate tightening by the US Federal Reserve and the disruption to global supplies of food and commodities caused by Russia’s war in Ukraine. Moreover, there are rising signs that zero-COVID-19 policies are contributing to slowdown in China, APAC’s biggest economy. Finally, the Japanese yen and other Asian currencies have depreciated sharply against the US dollar.

However, so far, these challenges have not seriously impacted commercial property investment in APAC. Preliminary indications from Real Capital Analytics show that aggregate investment transactions fell 12% y-o-y in Q1 2022, to USD35.6 billion. Seoul and Shanghai appear to have seen high deal volumes, whereas Tokyo and Beijing were weak. Given the severe COVID-19 restrictions in place over much of Q1 in two major investment centres, Hong Kong and Shanghai, with lesser restrictions in other cities, the decline could easily have been steeper.

Below, we summarise recent developments in APAC markets, and implications for commercial property.


  • Chinese real GDP growth of 4.8% YOY in Q1 2022 exceeded consensus forecasts. However, there were clear signs of slowdown in March, including a 3.5% YOY drop in retail sales and a 26% y-o-y drop in home sales by value. High-frequency indicators for April have also been weak
  • Bottlenecks are re-emerging in China’s supply chains as a result of the prolonged citywide lockdown in Shanghai, while stiffer restrictions are also being imposed in Beijing
  • Against market expectations, the People’s Bank of China appears reluctant to loosen monetary policy aggressively, perhaps seeing little point in stimulating the economy while lockdowns are in place
  • Citing zero-COVID-19 policies, the International Monetary Fund (IMF) has cut its estimate of 2022 real GDP growth from 4.8% to 4.4%1. Some private-sector forecasters now see growth at about 4%
  • Over the medium term, urban migration, expansion in the middle class and growth in the technology sector will support growth of office jobs in the Tier 1 cities. Oxford Economics predicts a rise in office-based employment of 503,000 for Shenzhen over 2022-26, just ahead of Beijing2
  • Logistics shipments in China are about 60% driven by domestic e-commerce, which makes up 25% of total retail sales. Even with slowing global trade volumes, logistics leasing demand should stay firm


  • Japan posted real GDP growth of 1.6% for 2021, and the IMF currently projects growth of 2.4% for 2022. COVID-19 restrictions are being steadily eased, but may weigh on growth in H1, while high oil prices pose a risk to medium-term growth since Japan relies almost entirely on imports for fuel
  • Reflecting wide interest rate differentials, the Japanese yen has slid in 2022 to close to a 20-year low of 129 against the US dollar. The yen’s weakness will reduce profits for unhedged dollar-denominated property investment funds in Japan
  • However, Japan should still attract domestic and foreign property investment because Japanese property assets offer the highest yield spreads over government bonds of any major APAC market. Tokyo Grade A offices and logistics assets yield 2.7%-3.3%3, versus 0.25% for 10-year bonds
  • We see scope for Value-Add investors to be creative in upgrading Grade B and Grade C Tokyo offices. While prices are still high, they are lower than for prime grade assets

Hong Kong SAR

  • The city’s fifth wave of COVID-19 will weigh on domestic demand in H1, although easing of certain restrictions from late April should provide some support for economic activity. Real GDP growth now looks unlikely to exceed about 2% in 2022
  • Hong Kong’s Hang Seng Equity Index dropped for the fourth consecutive quarter in Q1 2022, falling 6% to come close to a six-year low. Further, the amount raised by IPOs fell 90% y-o-y
  • Indications from Q1 suggest that office rents will probably fall for the fourth consecutive year in 2022, while retail rents will remain under pressure
  • Conversely, preliminary data from RCA show that investment property transactions in Hong Kong rose 23% y-o-y in Q1 2022, to USD2.16 billion


  • Based on advance estimates, Singapore’s economy grew by 3.4% YOY in Q1 2022, down from 6.1% YOY in Q4 2021 but in line with consensus forecasts of growth for the full year
  • The Monetary Authority of Singapore tightened monetary policy for the third time in six months on 14 April, in response to rising inflation. Tighter monetary policy by itself seems unlikely to alter the generally benign growth outlook for Singapore
  • Indications from Q1 support our expectation that average office rents will rise by 6%-7% in 2022; this looks set to be the strongest performance in APAC


Hong Kong Office

Vacancy reaches a record high – The Grade A office market expanded in Q1 2022 after nine quarters of contraction, registering positive net absorption of 466,400 sq feet4. However, the overall vacancy rate was steady at 11.6%, and total vacant space climbed to a record high of 9.6 million sq feet, as new supply entered the market and space take-up in new buildings slowed down. Average rents came under pressure, dipping 0.6% from Q4.

Looking ahead, substantial new office supply in Hong Kong in 2022 will be concentrated in the decentralised areas, where rents are 40%-75% lower than in the CBD. Accordingly, we expect citywide weighted average office rent in Hong Kong to fall by about 4% this year, marking the fourth consecutive year of decline.

Leasing momentum was mixed during the fifth wave of COVID-19. In the most notable recent deal, the flexible workplace operator IWG leased the entire 64,800 sq feet of 8 Queen’s Road East in Wan Chai to launch its 18th outlet in the city. Meanwhile, Wells Fargo renewed its lease on 51,300 sq feet of space at Cityplaza Four in Quarry Bay, for a monthly rent of HKD2 million, while the fund manager Invesco will relocate from Admiralty to 37,000 sq feet of space at Jardine House in Central.

Hong Kong Retail

Drugstore and necessity trades were active – Leasing sentiment weakened in Q1 2022 as retailers postponed expansion plans amid strict social distancing restrictions. According to JLL, average rents of high-street shops and overall prime shopping centres fell 6.8% and 3.1%, respectively, from Q4.

However, drugstore and necessity retail tenants have bucked the difficult trend. The local grocery chain DS Groceries recently leased 7,000 sq feet at Argyle Street in Mongkok, while the household products chain Titan took 1,100 sq feet at Russell Street in Causeway Bay. The Japanese grocery brand Don Don Donki will lease 25,000 sq feet at Fashion World in Hung Hom for five years at HK$1.2 million per month. 

In the investment market, Henderson Land sold a podium at Arbour in Tsim Sha Tsui for HK$210 million (HK$21,000 per sq ft, 2.5% gross yield). Chinachem was awarded a commercial site in Tung Chung for HK$2.8 billion (accommodation value only HK$2,200 per sq foot).

Hong Kong Residential

New home sales contract – New home sales volume fell by 63% in Q1 from Q4, to 1,723 units5, the lowest level recorded since early 2016, with most units sold coming from existing stock in the market. Grand Victoria in Cheung Sha Wan, jointly developed by Wheelock Properties, Sino Land, SEA Group and K Wah International, became the best seller of the past month with 19 units sold.

Developers continue to eye landbank opportunities despite weak market sentiment. Wheelock Properties acquired a site on Ventris Road in Happy Valley for HK$1.7 billion (accommodation value HK$19,300 per sq foot) for redevelopment into mid-density luxury flats. MTRC’s latest Pak Shing Kok development project in Tseung Kwan O was also highly sought after by developers, with nine bids received.


Singapore Office

Flight to green offices – CBD Grade A office rents continued to rise in Q1 2022 as more employees returned to their workplaces and as COVID-19 restrictions were further eased. Data from JLL, Knight Frank and Colliers suggest that on average, CBD Grade A office rents rose by between 1.2% and 2.3% to around S$10.25 per sq foot over Q1.

Property consultants have observed that companies are now seeking more sustainable spaces and healthy working environments to maintain their talent pool and to attract new staff. Such prospective tenants seem prepared to pay a rent premium of up to 10% for green buildings possessing various levels of BCA Green Mark certifications. As of end-2021, 49% of buildings had a green rating, and Singapore targets 80% by 2030 according to its Green Building Masterplan. A recent example is Lazada One, a building which has undergone extensive improvements including incorporation of smart technology, sustainability features and a major facelift. This building has achieved 94% occupancy at higher rents than before its refurbishment.

Singapore Retail

Sales should recover after drop in February – After five months of expansion, total retail sales dipped 3.4% y-o-y in February. This drop partly reflected the timing of Chinese New Year in 2022, although the absence of tourists continued to impact sales categories such as department stores, food and beverages, and apparel and footwear. Total retail sales reached SGD3.2 billion, of which online sales made up 13.6%. Retail sales are generally expected to improve in coming months as COVID-19 restrictions are eased further, and as tourists start to return.

Singapore Residential

Resale value up 36% in March – Despite cooling measures introduced in December and the property-related tax announced in February, sales momentum has remained firm. Resale units sold in March totalled 1,302 versus 960 in February, an increase of 36%. Resale volume fell 31% YOY, but was 8% higher than the five-year average resale volume for March.

The Outside of Central Region (OCR) made up 61% of resale transactions while the Rest of Central Region (RCR) made up 25%,with the remaining 14% coming from the Core Central Region (CCR). All regions recorded healthy price growth, but the highest rise was seen in the OCR (up 11.8% YOY), followed by the RCR on 7.7% and the CCR on 7.1%.


Shanghai Office

Leasing and investment activity firm prior to citywide lockdown – The finance and technology, media and telecoms sectors were the top drivers of leasing in Q1 2022, each representing 19% of new demand. Citywide net absorption was 273,000 sq metres, up 5% from Q4 20216. With new supply under control, the citywide vacancy rate stayed below 16%. Average rent rose by about 1% over the quarter. The most important new project launch was Shun Tak Centre, a 36-storey building with LEED Gold certification in the New Bund area. In late March, Shanghai went into lockdown, and construction and leasing activity was largely halted.

On the investment front, China Zheshang Bank acquired a 54,200 sq metre turnkey asset and 280 parking lots near the Lujiazui area of Pudong from the developer Greenland for RMB3.0 billion for self-use. The asset is in its final stage of construction and is expected to be delivered by the end of May.

Another office building developed by Greenland was divested through online judicial sale. The asset, Greenland Yingtong Tower located on the Huangpu Riverfront, was acquired by the real estate agency firm Pacific REHouse for RMB1.4 billion (RMB39,002 per sq metre based on above ground area) on 4 April. It was the third time for the asset to be listed on the Alibaba online auction platform by Greenland’s creditor China Orient AM Co., and the final transaction price was 20% below the initial listing.

Shanghai Retail

Lowest supply for three years in Q1 – The food and beverages sector led Shanghai retail leasing in Q1, making up 45% of demand. With net absorption of 32,000 sq metres and no new supply, the vacancy rate dropped from 6.7% to 6.4%, a three-year low. The average rent for ground floor retail in Grade A malls increased 0.4% q-o-q to RMB34.9 per sq metre per day7.

The K11 group won the bidding to operate a retail project owned by the government in Jinqiao. This is the commercial portion of a mixed-use project spanning 420,000 sq metres, located above a subway station with three metro lines. The operating brand, K11 Select, will be introduced to Shanghai for the first time. Nationwide, this is the group’s third project with an asset-light management strategy, and it aims to launch 10 K11 Select projects in China by 2023.

Shanghai Logistics

Strong take-up and firm rent growth – In Q1 2022, the average rent for logistics warehouses rose 2.2% from Q4 to RMB1.6 per sq metre per day. This was attributable to expanding demand from third-party logistics firms handling cross-border shipments and automobile accessory manufacturers in higher-rent submarkets, such as the Pudong Airport area and Lingang. However, the citywide vacancy rate also rose, from 7.9% at end-2021 to 9.2%, following the conclusion of several online shopping festivals and related expiration of short-term leases8.

Shanghai Residential

Increasing serviced apartment supply – Four serviced apartments totalling 632 units entered the market in Q1 2022, whereas only two projects totalling 413 units were launched over the whole of 2021. Average rent increased 0.1% to RMB8.8 per sq metre per day over Q1. The vacancy rate climbed from 15% to 17%, due to ample new supply and increased COVID-19 restrictions late in the quarter9.

In the residential sales market, after a mild rebound over the first two months of 2022, surging COVID-19 cases in March put a stop to the market’s recovery. Transaction volume was 2.66 million sq metres in Q1, down 16% y-o-y, and new supply of housing stock reached 3.03 million sq metres, double the level of Q1 2021.

1Source: International Monetary Fund. See (April 2022).

2Estimate as of April 2022.

3Source: JLL (as of Q4 2021)

4Source: CBRE (April 2022)

5Source: Hong Kong Land Registry

6Source: CBRE Shanghai Office Market Overview Q1 2022

7Source: CBRE Shanghai Retail Market Overview Q1 2022

8Source: CBRE Shanghai Logistics Market Overview Q1 2022

9Source: Savills (April 2022)


The information in this market update is current as at April 2022 and does not necessarily reflect subsequent market events and conditions. This market briefing is provided for information purposes only and articles do not provide individual financial, legal, tax or investment advice. Past performance is not indicative of future performance. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance. The statements and statistics contained herein are based on material believed to be reliable but are not guaranteed to be accurate or complete. Investments strategies should be evaluated relative to each individual’s objective in consultation with their legal, investment and/or tax advisor. Schroders capital is not liable for any errors or omissions in the information or for any loss or damaged suffered.


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