A recent global survey of the top researchers at Savills provides insights for 2022 on yields, leasing, the importance of ESG, investment and commercial rental. The findings point to the resilience of real estate in an era of accelerated change and evolution in the wake of the pandemic.
Outlook for yields
Prime yields are largely expected to remain static until Q2.2022. However, in some sectors such as industrial and residential, yields are expected to rise, reflecting investor interest. Offices remain resilient, with 97% of our researchers anticipating yields to remain stable or only decrease slightly.
Tech occupiers to drive leasing activity
Office leasing activity is expected to be comparable with pre-pandemic levels by 2022 – but this varies by city. Emerging markets such as China, Indonesia and Vietnam have stable or increasing leasing activity, spurred by strong economic growth and a slower shift to flexible working. Tech occupiers are expected to lead demand across the board, with 79% of researchers anticipating higher leasing activity than in 2019. Despite embracing flexible working practices, offices will remain integral to tech companies.
In Vietnam, Ms. Hoang Nguyet Minh, Director of Commercial Leasing, shared: ''The demand for office space in H1.2021 is stable and reflected in large purchases from big technology companies such as Shopee, Line at Capital Place and HCL at Leadvisors Tower. Despite Covid, the IT industry continues to develop, expand and attract investment from multinational companies, therefore, their demand for office leasing is high. Other industries such as manufacturing, insurance, and banking will also continue to grow”.
Sustainability matters
Seventy-five percent indicated that sustainability is important for investors. Cities in the Asian-Pacific such as Hong Kong, Tokyo, Jakarta and Seoul have not yet prioritised sustainability. However, given the significance of ESG, it is unlikely to be long before they do. Company reputation is the strongest motivator behind sustainable investment, while 46% indicated the opportunity to increase returns was important.
Share of international capital to rise
As international travel restrictions ease and economies start rebuilding, global investment is predicted to increase. In 2022, 47% of all investment is expected to come from international investors, (of which just under half are from neighbouring countries).
Offices sector to lead the market
Offices, the largest real estate sector, will remain in demand. In more than half of the cities surveyed, offices are expected to be the dominant asset class for investment in 2022. In Shenzhen, Beijing, Guangzhou and Seoul, 60% of all investment is expected to flow into this sector.
Savills Vietnam’s H1 Report also shows stable performance and an optimistic outlook for the office market in Ho Chi Minh and Hanoi. The number of ICT enterprises is expected to reach 100,000 in 2025, nearly double that of 2020. By 2022, emerging markets, including Vietnam, will have the most vigorous rental activity thanks to economic growth, industry support, and flexible working trends.