Asia Pacific Real Estate Trends Report
Of all global regions, Asia Pacific continues to exhibit the strongest recovery from the worldwide recession. The fall-off was briefer and the rebound much faster compared to the rest of the world. All three operating metrics for lodging – Occupancy, Average Rate and RevPAR – show double-digit year-over-year (YOY) growth increases, the most dramatic improvements recorded anywhere. As a result, every global franchise group with high-end brands has aggressive development programs and continues to see the region as having substantial potential into next decade.
After bottoming in Q4 2009, Construction Pipeline totals for Asia Pacific have grown for three quarters in a row and now stand at 2,009 projects/484,161 rooms. Growth patterns, however, are not uniform throughout the region.
China is the world’s third largest economy and the fastest growing. The country’s Pipeline has been increasing for seven consecutive quarters, and has now surpassed the decade’s previous peak reached in Q2 2008. At 1,248 projects/336,349 rooms, China is the second largest country Pipeline in the world. Most dramatically, with 986 projects/264,382 rooms, it has 35% of the world’s projects and 44% of rooms presently Under Construction. For perspective, China’s Under Construction numbers are larger than the entire Pipelines of every other global region, except for the United States. In Q3, China has the largest number of Construction Starts in the world, and the second largest number of New Projects Announced into the Pipeline, trailing the United States by a mere 887 rooms.
India is the world’s 11th largest economy and the second fastest growing. At 454 projects/79,915 rooms, it has the third largest Pipeline globally and has been trending upward for three quarters. India is often mentioned in the same lodging growth conversation as China, but Pipeline scale is quite different, as India’s project count is only 36% of China’s and, by rooms, just 24%.
As lodging development continues at an accelerated pace in China and India, concerns about these superheated economies are rising. Fueled earlier by massive government stimulus and directed lending programs, China’s recent increase in interest rates and its six attempts to expand banking reserves during the year have not as yet successfully cooled the economy. There is a growing property bubble and an increasing number of highly leveraged loans that are likely to sour. More recently, rising inflation has become a concern. In November, the Consumer Price Index increased 5.1%. Driven by housing and food prices, it is the largest inflation uptick in three years. India’s economy, a quarter of the size of China’s, has seen inflation soar, recently hitting 8.5%YOY. These factors could eventually temper developer sentiment as more tightening is expected for the near-term.
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