LaSalle Investment Management (LaSalle) has published the Mid-Year update for the 2019 Investment Strategy Annual (ISA). Under a slow growth, low inflation, and low interest rate environment, LaSalle’s regional real estate strategy focuses on sectors, markets and locations where domestic consumption growth supports real estate demand.
LaSalle expects a weaker macro environment in the next 6-12 months than the past few years, partly due to the U.S.-China trade war and the maturing global economic cycle. However, a financial crisis or a regional recession is not in LaSalle’s base case. Japan is likely to be more resilient than other major Asia Pacific countries. China is expected to experience some short-term weaknesses but remains positive on the mid to long-term as the country has multiple monetary and fiscal tools to offset the negative impact from the trade war. Since market outlook has shifted to monetary easing, capital market liquidity is expected to remain high in the region, barring any external disruption.
Property Sector insights in Asia Pacific:
- Office: Office market performance is expected to continue to diverge in the region. We recommend being highly selective on submarkets, location and asset quality.
- Logistics: We continue to favor the logistics sector in the region. We anticipate high development yields in China and South Korea. Not only is logistics demand supported by domestic consumption and the growth of e-commerce, but logistics rents are generally less volatile than those of offices.
- Retail: We are cautious of the overall retail sector. However, selective retail properties in Japan and Singapore are expected to be less impacted by e-commerce than South Korea.
- Hotel: Asian tourist demand is another strength for the region. Location selection is critical, as well as identifying the hotel segment that match tourist profile.