Effective yields for Grade ‘A’ office buildings in Hanoi and Ho Chi Minh City lead the world during 2015 according to new research.
Asian real estate has enjoyed a strong run over recent years, fuelled by cheap debt and ample liquidity flooding out of local markets, including China in particular.
In its World Office Yield report, real estate firm Savills noted that while value from core assets in first tier cities in Asia appears to have been mined as cap rates have ground lower, opportunistic plays remain in some sectors and geographies for investors prepared to push further up the risk curve.
In the last quarter of 2015, Asian markets were finally able to put U.S. interest rate worries behind them as the U.S. Federal Reserve increased the base rate by 25 basis points, with little immediate fall out.
Uncertainties surrounding China’s economy have come to dominate concerns, however, not just for the impact they may have on the domestic economy, but also on trading partners. The dangers of rising rates have not disappeared, and we expect to see further, though modest, rises later in 2016 with implications for debt of all kinds.
For now, with the exception of Japan and Australia where volumes remain robust, capital outflows from Asia are the new norm and China’s outbound real estate capital – both to Asia and the West – hit new highs in 2015.
In an uncertain world, the U.S. has assumed a primacy in terms of global destination of choice for Asian investors, especially safe haven gateway cities such as New York, Los Angeles, San Francisco and Chicago.
