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Published on March 14, 2008

The prediction came in the real-estate-services firm's latest Asia-Pacific Property Digest.

Rental and capital-value growth over the past 12 months has been generally strong, exceeding expectations in some markets, while yields have held firm or compressed. In the office sector, occupier demand is expected to remain solid this year.

With a moderate supply pipeline, most markets are forecast to see further rental increases, albeit at a more moderate rate, so unfortunately for corporate real-estate executives, this year is likely to remain challenging. With the continued weight of money in the region and the office sector retaining the title of most-preferred core sector, further capital-value growth and a compression of yields is expected in some markets.

Singapore's Raffles Place and Hong Kong's Central district should continue to outperform in regard to total returns, while a few markets, including Bangkok, will be challenged by a rise in building completions, said Jane Murray, head of Asia-Pacific research.

Jones Lang LaSalle (Thailand) managing director Suphin Mechuchep said unlike most cities in the Asia-Pacific, Bangkok's property market had been relatively subdued over the past 12 months, with demand growing slowly.

This was due mainly to several unfavourable factors, including political uncertainty, concerns over rising oil prices, the rising cost of living, a slowdown in the US economy and the strengthening of the baht.

However, thanks to strong market fundamentals, most property sectors have so far proved resilient, with rents remaining generally stable and new developments continuing to move forward, she said.

In the retail sector, expansion and higher rents are anticipated this year.

"Further rental increases are expected in nearly all markets, an exception being Beijing, where we shall see the completion of numerous shopping centres," said Murray.

In the residential sector, rents are likely to increase further this year in Hong Kong, China, India and Singapore.

"We predict Hong Kong prime rental and capital values will continue to rise as a result of the demand-supply imbalance, and Singapore should continue to see low vacancy rates and strong total returns despite its comparatively large development pipeline," predicted Murray.

While Jones Lang LaSalle was generally optimistic about Asia's property prospects this year, it did highlight certain risks on the horizon.

"There are a number of hazards that require careful watching, notably the high probability of an economic slowdown in the US and the impact of ongoing financial-market strain," said Murray.

"At the same time, the massive structural changes that are occurring in the Asia-Pacific - the opening up of economies to foreign players, increasing urbanisation and incomes, improving property-market transparency to name a few - will continue to create a wealth of opportunities for the real-estate industry," Murray added.

The Nation