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"The Asia Pacific property markets are entering a correction phase that will continue over the next 12 months at least," Jones Lang LaSalle (JLL) Head of Research (Asia Pacific) Jane Murray said in a report 'Asia Pacific Property Digest Second quarter 2008'.
The rapid run-up in rents and capital values seen in recent years has come to an end in most markets, he added.
"Activity levels are now slowing in many of Asia Pacific's property markets following the frenetic pace of the last few years," the report said.
Murray, however, noted that in contrast to previous cycles, the extent of the downturn is expected to be moderate in most markets in Asia Pacific given the underlying sound fundamentals.
The long term structural drivers and economic growth prospects would ensure that the region continues to attract an increasing share of global real estate capital, he added.
In the office sector, he said more companies are putting expansion plans on hold, contesting renewal rates and delaying previous plans to upgrade their facilities.
"Historically low vacancy rates and supply constraints in most markets will help to mitigate the impact of a weakening in occupier demand," he said.
However, Murray pointed out that potential oversupply is becoming an issue in some parts of the region, notably tier I cities in China and some of the Indian suburban micro markets.
"Tokyo has been the first major office markets to move to the downturn phase of the cycle and others are expected to follow suit over the next 12-18 months," he said.
The Jones Lang LaSalle report highlighted that the retail sector has continued to perform well over the first half of the year, with Hong Kong and Shanghai posting the highest rental growth in the region. However, it said that emergence of more difficult trading conditions, coupled with new supply coming on line in number of markets is likely to result in more moderate rental growth going forward.
The retail sector continues to see significant structural change, particularly in the rapidly emerging markets of China and India where malls are becoming a more prominent feature of the landscape and the expansion of high-end retailer continues apace.
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