2024 Mid-Year Outlook – Focus on Asia: Wide Divergence in Fundamentals

Sum­ma­ry: The cur­rent inter­est rate envi­ron­ment has been a pri­ma­ry deter­mi­nant of real estate cap­i­tal mar­ket con­di­tions across the region.

By Tim Jowett, Head of Asia Research at Hines

In Asia, the macro sto­ry is mixed at the halfway point of 2024, with the real estate mar­ket price cor­rec­tion mild in com­par­i­son to the U.S. and Europe, thanks to rel­a­tive­ly healthy fun­da­men­tals and resilient domes­tic liq­uid­i­ty. Infla­tion gen­er­al­ly has remained sticky and while trend­ing down, has been mean­ing­ful­ly above pre-pan­dem­ic lev­els. This has kept inter­est rates ele­vat­ed. The excep­tions remain Chi­na (where defla­tion­ary pres­sure is appar­ent due to domes­tic eco­nom­ic weak­ness) and Japan (where rates rose for the first time in 17 years in March 2024). 

This rate envi­ron­ment has been a pri­ma­ry deter­mi­nant of real estate cap­i­tal mar­ket con­di­tions. Across Devel­oped Asia, 12-month trail­ing trans­ac­tion vol­ume has fall­en from US$145 bil­lion in Q1 2022 to just under $70 bil­lion by Q1 2024.1 This has large­ly been dri­ven by a sharp­er fall off in vol­umes in mar­kets with the most severe inter­est rate increas­es: Aus­tralia, South Korea and Hong Kong. 

Exhib­it 1: Rela­tion­ship Between Infla­tion and Rent Growth (Asia)

Relationship Between Inflation and Rent Growth (Asia)
Source: JLL, CBRE, Oxford Eco­nom­ics and Hines Research. As of 3Q 2023. Note: Long-term analy­sis designed to estab­lish the rela­tion­ship between infla­tion and rent growth. R squared: Coef­fi­cient of deter­mi­na­tion rang­ing between 0 ‑1 (0 ‑100), reflect­ing per­cent­age of the response vari­a­tion reflect­ed by the lin­ear model/​factor. The high­er the num­ber, the high­er the cor­re­la­tion with 1 (100), reflect­ing a com­plete correlation.


Liq­uid­i­ty in Japan has remained strong, thanks to still accre­tive financ­ing and pos­i­tive spreads. We see the decline in trans­ac­tion vol­umes bot­tom­ing through the next two quar­ters as investors gain greater cer­tain­ty on the tra­jec­to­ry of rates cou­pled with nar­row­ing bid-ask spreads. Over­all, prices in Devel­oped Asia were down around 10% on aver­age from their peak in local currencies—but were cheap­er once cur­ren­cy effects are considered.

We’re see­ing a wider diver­gence in fun­da­men­tals across prop­er­ty types post-pandemic:

  • Liv­ing remained robust region­al­ly, with high occu­pan­cies sup­port­ing above-infla­tion rent growth
  • Momen­tum in the ware­house sec­tor has soft­ened as new sup­ply has trend­ed up in response to healthy occu­pi­er demand, notably in South Korea and Japan
  • After years of under­per­for­mance, retail has been in a recov­ery phase bol­stered by pos­i­tive demo­graph­ic and tourism trends in many key Asian cities as well as con­tained new supply
  • The office sec­tor has con­tin­ued to face the great­est head­winds, but there are pock­ets of health. Seoul con­tin­ues to deliv­er strong year-over-year rental growth. With a surge in leas­ing demand in Tokyo over the last 12 months, sup­port­ed by improv­ing health in cor­po­rate Japan, we believe we are in the ear­ly stages of an upward trend in rent

Look­ing for­ward to the sec­ond half of 2024, sus­tain­able income growth remains our pri­or­i­ty. With high­er rates, we expect spreads to be low­er than pre-pan­dem­ic lev­els, but our research shows rents in Devel­oped Asia have his­tor­i­cal­ly exhib­it­ed strong growth in peri­ods of high­er inflation. 

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