The U.S.-China trade conflict will continue to weigh on the business outlook in Greater China in 2019. However, new infrastructure development will drive the formation of strategic hubs and counterbalance much of the downside risk. Investment demand is expected to remain solid, while the deployment of new technologies into different sectors could stimulate new commercial leasing demand, particularly from technology companies. Below are the key property sector trends CBRE Research expects to see in Greater China in 2019.
U.S.-China trade conflict and the ensuing economic uncertainty are set to dent office demand in mainland China and Hong Kong. Leasing momentum in Taiwan will be less affected. Office rents will likely soften in oversupplied and trade and manufacturing-driven cities in 2019.
The amalgamation of online and offline will continue to drive the evolution of retail demand on the mainland. Retailers in Hong Kong and Taiwan will adopt a conservative approach towards expansion due to the diminishing wealth effect. Retail rents are projected to stay flat or grow slightly in most markets across Greater China.
Tight land and warehouse supply will translate into steady logistics rental growth in the Greater Bay Area, Yangtze River Delta and Pan-Beijing area. Risks include potential weaker leasing demand stemming from the US-China trade conflict and the gradual migration to self-built warehouses by major e-commerce companies.
Domestic and foreign investors will continue to seek opportunities in mainland China, supported by the improving funding environment. End-users and longer-term investors will remain active in Hong Kong, while reshoring by Taiwanese manufacturers is expected to benefit the local industrial property market. Yields will likely expand slightly in 2019 as capital values adjust to growing economic risks.