Asia Pacific real estate market update May 2022


APAC real estate: four key figures

APAC: investment property volumes, Q1 2022

China: estimated real GDP growth, 2022


USD39.5 billion (-11% y-o-y)1


3.5% (vs 8.1% in 2021)2

USD/JPY exchange rate (25 May)

Singapore: passenger movement at Changi Airport in April 2022


127 (14% weaker than 2021 average)


40% of pre-COVID-19 level (vs 18% in March)

Hong Kong SAR

New Chief Executive; interest rates rising; hotels and industrial assets attract investment capital

  • John Lee has been elected as the new Chief Executive of Hong Kong. His five-year term will begin on 1st July, replacing outgoing Carrie Lam. He is expected to face the challenge of resolving pressing issues, including the reopening of the city’s borders with mainland China and the rest of the world, as well as housing shortages which are a perennial
  • The Hong Kong Monetary Authority followed the lead of the US Federal Reserve by raising the city’s base lending rate by 50 basis points to 1.25% on 5 May. Commercial banks have kept prime rates unchanged, but HIBOR rates have Oxford Economics forecasts a base lending rate of 2.50% by the end of 20223.
  • Hit by the Omicron-wave of infections, retail sales in Hong Kong slumped 7.6% y-o-y in Q1 2022. Online retail sales, however, surged 36.3% y-o-y over the same period. Retail sales are expected to improve following the easing of social distancing measures and the Hong Kong government’s handout of consumption vouchers to spur
  • Three hotels worth a combined HKD4.0billion have changed hands over the past couple of months. Magnificent Hotel Investments acquired The Bay Bridge in Sham Tseng for HKD1.42 billion and sold Grand City Hotel in the Western District for HKD900 million to a joint-venture consisting of a foreign fund and a co-living On an expansion spree of its co-living strategy, the same operator, in partnership with another institutional player, had also purchased the Rosedale Hotel in Tai Kok Tsui for HKD1.38 billion earlier in April.
  • Industrial assets for alternative uses continue to attract institutional capital. Examples include the acquisition by a Core APAC investment fund of Cargo Consolidation Complex, a 100% occupied data centre property for HK$2.88 billion (HKD10,640 per sq foot), and a global Core fund’s purchase of an industrial property in Fanling for a reported HKD450 million (HKD4,400 per sq ft). The intention of the second purchase is to repurpose the asset into a cold storage

1. Source: MSCI RCA Capital Trends Asia Pacific Q1 2022

2. Source: Schroders, Economic and Strategy Viewpoint (May 2022

3. Source: Oxford Economics, Country Economic Forecast | Hong Kong SAR (20 April 2022)



Reopening of borders bodes well for retail and hotel sectors

  • Following the reopening of its borders to all fully vaccinated travellers, the Singapore government has announced that it is on track to restoring passenger volumes at Changi Airport at least 50% of pre-pandemic levels this year. Passenger movement at Changi Airport has already risen to close to 40% of pre-COVID-19 levels in April4, versus 18% in March.
  • As air travel rebounds, Changi Airport has announced that it is looking to hire more than 6,600 workers5. The Terminal 5 project at Changi Airport is also set to restart after being kept on hold for the past two years. Likewise, Singapore Airlines has recently resumed recruitment of cabin crew after a two-year hiring freeze6.
  • To speed up the recovery of air travel, transport ministers from seven South-East Asian countries met in May and pledged to work closely to strengthen air connectivity between South-East Asia and other regions. The Singapore government is also in discussion with South Korea, a popular bilateral holiday destination, to allow more flights between both countries in the coming
  • Over the next few months, a gradual increase in tourist numbers should help to boost prime retail performance in Singapore’s central region. Hotel operators are also reported to be facing a surge in demand for bookings.


Investment volumes down in Q1; Japanese yen stabilises; Tokyo Grade A office vacancy drops

  • Based on MSCI RCA data, total property investment transactions fell 55% y-o-y in Q1 2022, to USD5.5 billion7, versus an 11% decline for APAC as a whole. According to MSCI RCA, elevated office pricing and an expanding supply pipeline in logistics have pushed most investment from overseas so far in 2022 into multi-family Given near-zero bond yields, Japanese office and logistics assets still offer good value to investors seeking income, and we see ample scope to apply Value-Add strategies across the market. We thus expect investment volume to rebound from Q1’s weak level.
  • The Japanese yen hit a 20 year low of 131 against the US dollar on 6 May. Since then, the exchange rate has recovered slightly to 127, but it remains about 14% weaker than the average rate of 110 over 2021. The yen’s weakness will reduce profits for unhedged dollar-denominated property investment funds in Japan.
  • There were signs of a pick-up in the Tokyo office market in While numerous new buildings were completed with some units still vacant, vacant units in existing buildings continued to be filled by companies relocating or expanding their space, leading the Grade A vacancy rate to drop for the first time in two years, by 0.5pp q-o-q to 2.0%8.

4. Source: Channel News Asia (4 May 2022)

5. Source: Channel News Asia (18 May 2022)

6. Source: Channel News Asia (12 February 2022)

7. Source: MSCI RCA Capital Trends Asia Pacific Q1 2022

8. Source: CBRE, Marketview | Japan Office | Q1 2022

Mainland China

Interest rates cut; signs of improvement in COVID-19 situation; investment activity in “new economy” sectors stays firm

  • Although China’s real GDP growth of 4.8% YOY in Q1 exceeded most forecasts, there were clear signs of slowdown in March and April, including an 11% y-o-y drop in retail sales and a 3% y-o-y drop in industrial production in Bottlenecks have re-emerged in supply chains following the citywide lockdown in Shanghai that started in late March, while restrictions have also been imposed in Beijing.
  • The Chinese authorities have responded to the economic difficulties by loosening monetary policy, cutting the five-year loan prime rate (the main driver of mortgage borrowing costs) from 4.6% to 4.45% on 20 May. This cut should support the residential property market, but it has probably come too late to prevent real GDP growth slipping from 1% in 2021 to the 3.5%-4.5% range in 2022.
  • As of late May, there are signs that the COVID-19 situation is easing in Shanghai, while in Beijing there are far fewer cases. The government is trying to restart industrial production in Shanghai. Daily throughput at Shanghai port fell 20% y-o-y in May, but this decline was partly offset by 8% growth in throughput at nearby Ningbo port in April and early
  • Investment activity in the logistics sector has remained firm. Recent notable deals include Link REIT’s acquisition for RMB947 million of three logistics assets located in the Yangtze River Delta from a listed logistics operator called Fujian Dongbai, which will remain operations manager of the assets. In addition, New World Development has agreed to buy a portfolio of six logistics warehouses located in western and central economic hubs such as Chengdu and Wuhan from Goodman for 29bn. New World has likewise formed a joint venture with Goodman to manage the portfolio.
  • The industrial assets developer DNE has formed a joint venture with GIC of Singapore to invest USD1.2bn in life science parks in China with the expectation of Core Plus to Value-Add returns. The seed asset is a life sciences facility valued at USD600mn located in the Zhangjiang business park in Shanghai that was previously owned and operated solely by



The information in this market update is current as at May 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. Investment 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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