Retail leads in Asia Pacific with 3% growth

As rents increase, retail properties in Asia Pacific continue to outshine other sectors at circa 3% per annum growth since 2004.

According to DTZ research, this level of growth has been maintained despite overall negative performance during the earlier part of 2009. Additionally, Q4 has returned to positive growth as the more heavily weighted markets (Singapore and Shanghai) have turned positive.

Office and industrial markets continue to be more sluggish, however, as 2009. Over the course of the cycle, the office sector experienced the largest fall with a peak to trough decline of circa 27% so far, followed by industrial with falls of 3%, with the possibility of further falls to come. Despite more encouraging economic fundamentals across the region, occupier demand remains weak on the back of slow global growth.

David Green-Morgan, Head of DTZ Asia Pacific Research said: "Retail markets are generally doing well with quarterly rental growth rates up to 8% being reported during the year. Strong retail sales have been sustaining retail markets across the region. Government stimulus across the region has helped sustain the retail sector and this is helping to sustain rental levels and boost prices in many locations."

There are recent economic indicators that many major economies are approaching a turning point. Both office and industrial sectors around the globe have either reached or are approaching bottom of the rental cycle as many markets have reached a balance between supply and demand, albeit at a much lower level than the peak of the cycle.

During the quarter global office rents fell by 2%, industrial fell by 1% and significantly, retail grew by 0.2% on the back of gains in Asia Pacific and levelling out in Europe.

However, global capital city prime rents are highlighting the continuing trend for the flight to safety. Many local markets are seeing capital cities bucking the global trend. Where wider economic drivers imply more significant falls, prime rents in the main markets have held up far better than anticipated. London City, Paris CBD, Hong Kong and Sydney have all levelled off during Q4 where many tier two cities have continued to fall.