Asia Pacific Real Estate Market Update July 2022


APAC real estate: four key figures

APAC: investment property volumes
(Jan-Jun 2022)

Singapore: investment property volumes
(Jan-Jun 2022)

USD82.7 billion
(-18% y-o-y)[i]

USD7.6 billion
(+52% y-o-y, strongest in APAC)[ii]

Japanese 10-year bond yield
(25 July)

Hong Kong SAR: one-month HIBOR
(25 July)

(lowest globally; prime-grade Tokyo office assets offer a 1.7-2.0pp[iii] spread over bonds)

(up from 0.1% at end-2021, expected to be 2.8% at end-2022 and 2.7% at end-2023)


Debate over direction of yen; drop in deal activity in H1 should be temporary; Tokyo office vacancy modest and pressure on rents should ease

  • The Japanese yen has fallen 15% so far in 2022 to 135 against the US dollar (28 July). There appears to be a split of opinion between mainly domestic forecasters who expect the yen to fall even further, and mainly foreign forecasters who predict the yen will soon appreciate.[v] With underlying inflation muted and wage growth stagnant, the Bank of Japan has little reason to adjust its zero interest rate policy. While this suggests that the yen may indeed fall further in the near term, Japanese property assets offer good value for foreign funds denominated in US dollars or other major currencies.
  • As reported, total investment transactions in Japan fell 32% y-o-y in H1 2022, from USD19.1 billion to USD12.9 billion. This decline was exaggerated by the yen’s weakness: in yen terms, we estimate the drop at about 24%. Given strong valuation support and lower prices for foreign investors, we believe that the drop in deal activity in Japan in H1 will be temporary.
  • Net absorption of combined Grade A and Grade B office space in the five central wards of Tokyo was mildly negative in Q2 2022. However, with no new supply over H1, total stock of 18.8 million sq metres and total occupied space at end-Q2 were barely changed from end-2021.[vi]Vacancy in Tokyo lies in the 3[(-5) was not found] range[vii] – a modest level for APAC’s largest city with its highest office stock.
  • Average office rents in Tokyo in Q2 seem to have fallen by about 1% q-o-q and 4[(-5) was not found] y-o-y for combined Grade A and Grade B office space.[viii] Landlords may have continued to cut rents to capture demand ahead of new supply expected in 2023. Rents in Tokyo Bay felt greater pressure due to the area’s poorer accessibility. Given modest vacancy and the fact that average rents have now fallen 16[(-20) was not found] from their recent peak in Q1 2020, we think the pace of rent decline will start to moderate.


Now #2 investment centre in APAC; office market stays very firm; logistics sector also strong

  • Singapore’s popularity with investors has increased further. Over H1 2022, based on preliminary data, investment property transactions in Singapore increased 52% y-o-y, to USD7.6 billion. This was a far stronger outcome than the 18% drop in aggregate APAC investment deals in H1. Singapore ranked in second place after Seoul by investment volume among APAC cities in H1, making up 9% of the total.[ix]
  • Leasing demand for investment-grade CBD office space gathered pace in Q2 2022, underpinned by the lifting of COVID-19 restrictions. Aggregate net absorption of 555,000 sq feet in Q2 was the highest level since Q1 2018, and the vacancy rate dropped over the quarter from 8.6% to 6.8%.[x] There was no new supply in the CBD areas over H1. Net effective rent grew by 7[(-9) was not found] y-o-y in Q2 , confirming Singapore’s position as the APAC market with the fastest-rising office rents.[xi]
  • Large corporate occupiers clearly favour Singapore. Following their lead, investors continue to buy strategic office assets in the city. For instance, on 1 July, Bright Ruby Resources, a Chinese-backed firm, announced the purchase of 16 Collyer Quay for SGD1.0 billion or over SGD3,600 per sq foot.[xii]
    • The logistics market stayed firm in Q2 2022, buoyed by low vacancy and high demand from 3PL operators, electronics groups, and the pharmaceuticals sector. Rent for prime warehouses rose 7% y-o-y. The government aims to boost land supply in the sector via the H2 2022 IGLS Programme, but completions will probably only be realised a few years from now. Firm rent growth should thus persist. One agency reports that capital values in the sector rose by 15% y-o-y in Q2.[xiii]

South Korea

Q2 real GDP growth beats expectations; cryptocurrency losses a risk for the financial system; Seoul office vacancy declines further; logistics supply very high

  • Real GDP growth picked up by 0.7% q-o-q and 2.9% y-o-y in Q2 2022, above consensus estimates. Private consumption was the main driver of growth, offsetting a drag from net exports. Consensus real GDP forecasts for the full year of around 2.5% look likely to be raised.[xiv]
  • South Korea is a major force in cryptocurrencies. Financial regulators are investigating USD3.1 billion of “abnormal” foreign exchange deals at two big commercial banks for possible money laundering linked to cryptocurrency investments. The investigation is widening as the new government faces criticism over a proposed debt relief plan for low-income people, which includes a scheme to forgive interest payments for young people who have made big losses in stock and cryptocurrency trades.[xv]
  • Grade A office vacancy in Seoul has been trending down, and now the Gangnam Business District popular with technology occupiers (GBD) is fully leased, with tenants immediately taking any space coming to market. Demand is spilling over into the Central Business District (CBD) and the Yeouido Business District (YBD), where vacancy rates also declined in Q2. One agent predicts that the GBD will have full occupancy for the next two years. Average office rent growth is accelerating, although it still seems likely to be no more than 3[(-4) was not found] this year.[xvi]
  • New supply of logistics space in Greater Seoul reached 1.4 million sq metres, up over 50% YOY. Total new supply for the full year should reach 4.8 million sq metres, equivalent to 47% of stock at end-2021. Firm demand pushed up warehouse rents by 4.3% over H1 2022 from the year-end. However, with such heavy supply, we continue to believe that logistics rents are nearing a peak.

Hong Kong SAR

Rising interest rates pose challenge for residential market; investment activity subdued; office market under pressure; industrial and logistics sector still active

  • Hong Kong base interest rates track US base rates due to the territory’s US dollar peg. On the view that US rates will surge over 2022 but fall back in 2023, one forecaster predicts that the Hong Kong Monetary Authority’s (HKMA’s) base rate will rise from 0.5% at end-2021 to 4.0% by end-2022, but fall back to 2.5% by end-2023.[xvii] However, many Hong Kong residential mortgage rates are tied to one-month Hong Kong Interbank Offered Rates (HIBOR), and the normal lag between changes in the base rate and in HIBOR rates is six months to one year. As a result, even if the HKMA’s base rate falls sharply in 2023, HIBOR rates may stay high for most of the year.[xviii] Given this outlook and the impending hike in prime rates (to which other residential mortgages are linked), many observers now expect residential prices to drift down by 0[(-5) was not found] in 2022, and to stay under pressure in 2023.
  • Over H1 2022, investment property transactions in Hong Kong SAR fell 27% y-o-y, to USD4.6 billion. Investment transactions in Q2 fell 43% y-o-y, to USD2.6 billion. The reasons for the decline include ongoing COVID-19 restrictions, geopolitical concerns and the trend in interest rates. Hong Kong ranked in sixth place among APAC cities over H1, making up 6% of the APAC total.
  • According to one agency, net absorption of Grade A office space in Hong Kong in Q2 2022 was a modest 269,000 sq feet, in line with new supply. At end-Q2, the vacancy rate was 9.4% and total unoccupied space was 9.5 million sq feet.[xix] Other sources suggest vacancy rates of 11[(-12) was not found][xx] , and unoccupied space is certainly close to a record high. There were few large new leasing deals in the period, although one broker has noted expansion by medical office groups on the fringe of Central.[xxi]
  • The industrial and logistics market remained robust in Q2 2022, buoyed by firm demand and vacancy of about 1%. Given the tight vacancy, certain cash-rich logistics operators have started to purchase assets themselves. Notably, China Resources Logistics acquired two en-bloc warehouses from Kerry Properties in Shatin and Chai Wan for a combined HKD4.62 billion for potential self-occupation.[xxii]


Cyclical indicators for Chinese economy partially rebound; mortgage boycotts spread; Shanghai cuts quarantine periods; companies remain active buyers of Shanghai property assets

  • Economic data for June 2022 suggest that the Chinese economy is rebounding after the lockdowns of April and May. Congestion in Chinese ports has eased, while most cyclical economic indicators (retail sales, fixed asset investment, copper and steel import volumes…) have turned upwards. The most important indicators which have not turned upwards are new housing starts and real estate sales. These have been very weak for the past year.[xxiii]
  • With the number of new COVID-19 cases coming under control, China has cut its 14+7 days mandatory quarantine time requirement for inbound travellers by half. Starting from 29th June, travellers will be subject to seven days of hotel quarantine and three days of home quarantine. This marks the biggest shift yet in mainland China’s COVID-19 travel restrictions.[xxiv]
  • Corporate buyers remain active in Shanghai office transactions. Notably, the e-commerce giant Alibaba has recently bought a seven-storey art centre in the West Bund area for RMB2.98 billion, or about RMB51,800 per sq metre. This mark Alibaba’s third transaction in the West Bund since 2019. In all, Alibaba has invested over RMB7.5 billion in the three projects that are planned as Alibaba’s new headquarters and R&D centres.[xxv]
  • Onshore international investors remain interested in China opportunities. For example, CapitaLand Investment has established its first onshore RMB fund in China, in partnership with a domestic group; CapitaLand holds a 12% stake in the RMB700 million fund. The fund plans to buy a quality office asset in Shanghai.[xxvi] In addition, Blackstone has invested in Wensheng Asset Management as part of the latter’s third round of fundraising. Wensheng is a domestic company that has moved from being a non-performing loan servicer to a distressed company investor and alternative asset manager.[xxvii]


Rising cost pressures cloud economic outlook; overall investment level down; biggest hotel deal in Australian history; investors look at Brisbane as well as Sydney and Melbourne

  • Rising cost pressures are the chief challenge to a mostly benign economic outlook for Australia. Retail sales growth was brisk in May, boosted by higher prices. The unemployment rate fell to 3.5% in June, further bolstering the outlook for wage growth. The CPI now looks set to jump from under 3% to over 6% this year. In response, the Reserve Bank of Australia pushed up interest rates by a further 50bp in July. The policy interest rate will probably end the year at 2.1%, versus 0.0% at end-2021.[xxviii]
  • Aggregate investment property transactions in Australia fell 34% y-o-y in Q2 2022, to AUD16.1 billion. After prolonged strength, industrial and logistics deals fell 63% y-o-y. Conversely, office deals rose 7%, while hotel and apartment deals also increased. Transaction yields in Sydney and Melbourne mostly now stand in the 3.5%-4.5% range, with marginal yield expansion evident in Q2.[xxix]
  • The Sydney hotel market has seen a strong resurgence in 2022, with several large assets transacted, including the Sofitel Wentworth and seven assets in the Travelodge portfolio, which were sold to GIC and Salter Brothers. Total Sydney hotel transactions in H1 2022 grew 113% y-o-y to AUD821 million. This figure does not include the purchase by Barings PE Asia of the Hilton Sydney for AUD530m, which is due for settlement later this year.[xxx] This is the biggest hotel deal in Australian history.
  • As a sign that investors are willing to look beyond Sydney and Melbourne, the Brisbane retail sector recorded an increase in investment transactions of over 100% y-o-y in H1, to AUD835 million. This partly reflected the 50% sale of the Grand Plaza Shopping Centre to EG Funds Management for AUD215m on a yield of 5.3%.

[i] Source: MSCI Real Capital Analytics database (20 July, 2022). Subject to revision.

[ii] Source: MSCI Real Capital Analytics database (20 July, 2022). Subject to revision.

[iii] Source: JLL REIS Tokyo Grades A and B Office databases (Q2 2022)

[iv] Source: Public Bank, Hong Kong

[v] Source: Bloomberg, Big Yen Short in Doubt for Global Traders Even as Tokyo Piles In (19 July, 2022)

[vi] Source: JLL REIS database, Q2 2022

[vii] The JLL REIS database cites 3.4% for Grade A space and 2.7% for Grade B space. CBRE and Colliers have higher estimates.

[viii] Sources: CBRE, Marketview | Japan Office | Q2 2022 (July 2022) and Savills, Office Leasing, Tokyo – Q2/2022.

[ix] Source: MSCI Real Capital Analytics database (20 July, 2022). Subject to revision.

[x] Source: JLL REIS Singapore office report for Q2 2022

[xi] CBRE (Figures | Singapore | Q2 2022) reports 7.6% growth y-o-y; JLL REIS data show 9.5%.

[xii] Source: Mingtiandi (1 July, 2022)

[xiii] Source: CBRE (Figures | Singapore | Q2 2022)

[xiv] Source: Oxford Economics, Data Insight | South Korea (26 July, 2022)

[xv] Source: Financial Times (27 July, 2022).

[xvi] Source: Colliers, Seoul Office Quarterly (8 July, 2022).

[xvii] Source: Oxford Economics (July database).

[xviii] Ibid.

[xix] Source: JLL REIS database (July 2022)

[xx] See, e.g., CBRE, Hong Kong Figures - Office Q2 2022 (14 July, 2022)

[xxi] Source: Savills, Hong Kong Office Leasing (Q2 2022)

[xxii] Source: Kerry Properties’ announcement to HKSE (20 May, 2022), other

[xxiii] Sources: Oxford Economics, Country Economic Forecast | China (22 July, 2022); Schroders Economics Group (22 July, 2022).

[xxiv] See

[xxv] Source: Loudian news agency (20 June, 2022).

[xxvi] See; other sources

[xxvii] See Shanghai Wensheng Asset Management Co., Ltd. Completes its Third Round of Fundraising

[xxviii] Source: Oxford Economics, Country Economic Forecast | Australia (18 July, 2022)

[xxix] Source: MSCI, Capital Trends | Australia (Q2 2022)

[xxx] Ibid.


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