Think Asia Pacific cities Q4 2019 outlook
The lights are dimming across many Asia Pacific economies heading into the fourth quarter of 2019 as headwinds continue to broaden and deepen. Weakening global growth and demand has led to a sharp slowdown in export growth across the region, precipitated by the unresolved trade tension between the U.S. and China. In recent weeks, China has announced additional tariffs on $75 billion worth of U.S. goods, in retaliation to tariffs imposed by the U.S. on the final $300 billion of Chinese-made U.S. consumer goods. Japan and Korea are also in the midst of a trade spat: both countries have dropped each other from its “preferential” list of trade partners, putting at risk Korea’s semiconductor industry. Korea’s export sector was already in a slump even before the trade dispute with outbound shipments having been shrinking for eight months straight.
The bleak export outlook across the region has in turn started to impact on business and consumer sentiment. China is particularly worrisome, with industrial production and fixed asset investments sharply slowing in recent months. Singapore’s manufacturing sector is also in contraction mode, shrinking four consecutive months since March 2019. While labour market conditions are still relatively supportive, signs of stress are starting to surface. Hong Kong’s jobless rate started to tick up in July 2019 to 2.9%, with conditions likely to deteriorate further as the continued protests have started to bite into the services economy; for instance, hotel vacancies have slumped by around 50% over the past month. Further downward growth revisions are expected across regional economies in 2019, with potential cuts in policy rates to support growth and inflation. The outlook for 2020 should improve marginally but is expected to stay below the full employment rate of growth, pointing to a downside balance of risks to economic conditions in the near term.
Office sector overview
- Trade disputes, political unrests and weakening growth may hurt sentiment and the employment outlook.
- Flexible workspace operators are key demand drivers, although activities are slowing given current limited availability.
- Despite supportive structural trends, uncertainties could dampen demand in the near term.
Retail sector overview
- Retail performance varied distinctively in regional markets in 2019.
- Dynamics in tourism adds non-discretionary volatility to retail performance of many gateway cities.
- That said, the booming tourism sector may continue to benefit the regional retail sector in the long term.
Logistics sector overview
- APAC takes up the biggest share of global e-commerce sales with fastest growth rate.
- Other structural trends supporting the long-term performance include higher consumer expectation and technology.
- Near-term occupier demand could be impacted by trade disputes.
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