Concrete Analysis | Co-working, modern logistics spaces resilient as Asia-Pacific property markets face long and cold winter

Lights are dimming across many Asia-Pacific economies heading into the fourth quarter of 2019, as headwinds continue to broaden and deepen. Weakening global growth and demand have led to a sharp slowdown in export growth across the region, precipitated by the still unresolved trade war between the United States and China.

The bleak export outlook has started to impact business and consumer sentiment. China is particularly worrisome, with industrial production and fixed-asset investment sharply slowing in recent months. Singapore’s manufacturing sector is also in contraction mode, shrinking for many consecutive months since March 2019.

Against the backdrop of a weak growth environment, further downward growth revisions are expected in 2019 across the office, logistics and investment markets in Asia-Pacific.

Regional companies will start to feel the pinch from a softening near-term growth outlook, with growing global and domestic risks overshadowing business sentiment. Hong Kong Central office rents have started to soften with rising vacancies, as the continuing protests have started to bite into business sentiment. This is particularly the case among Chinese companies, who have been a key driver of demand over the past few years.

However, the Singapore, Sydney and Melbourne office markets are likely to see relatively resilient rental growth. The near-term rental market in Singapore will continue to benefit from tight supply and rising demand from flexible working operators.

At the same time, co-working providers appear to be relatively insulated from the slowdown and a key driver of leasing activities globally. This subsector has seen the fastest growth across most regional markets this past year. International operators, led by WeWork, have continued their aggressive expansion in established and new geographies. Local operators, too, have made some significant strides.