Amid intricate conditions in Asia Pacific's commercial real estate, CBRE advises patience for favourable risk-adjusted returns. Escalating interest rates, slow price adjustments, and a gradual mainland China recovery shape the landscape. CBRE revises projections, estimating a 15% drop in APAC commercial real estate investments for the year, foreseeing a rebound by H1 2024. Australia's yields surge, Japan performs well, and Korea shows recovery signs. DWS focuses on Australia's residential built-to-rent properties, prime logistics, and monitors Japan and Korea sectors with low vacancy rates. Prime logistics shine with 7.5%-9% returns due to e-commerce, while selected cities offer potential in the sector. Office leasing may drop 5%, but tenant-friendly dynamics prevail. DWS supports multi-family housing potential, considering tax incentives for new residential built-to-rent projects.
Amidst the current conditions within the market, those seeking favourable risk-adjusted returns in the realm of commercial real estate across the Asia Pacific (APAC) region are advised to adopt a stance of patience and diligent choice. According to CBRE's analysis, the landscape of investment in the APAC commercial real estate sector has grown intricate due to a protracted sequence of escalating interest rates, inadequate price adjustments, and a recuperation in mainland China that has progressed more sluggishly than initially foreseen.
In response to these variables, CBRE has revised its previous estimate, now suggesting a potential reduction of 15% in the total volume of investments within the APAC commercial real estate sphere for the entire year. A potential resurgence is not foreseen until the first half of 2024. Notwithstanding these trials, CBRE adheres to the perspective that investors can still harness the potential of cyclic investment opportunities, fuelled by the envisioned augmentation of yields in the latter portion of 2023.
Projections indicate that Australia is poised to experience the most substantial surge in yields, while Japan's favourable performance is anticipated to persist. Additionally, Korea is exhibiting early signs of recovery, bolstered by the declining cost of financing. DWS also maintains a relatively positive perspective on these three markets, with particular emphasis on residential built-to-rent (BTR) properties and prime logistics in Australia. DWS is also closely monitoring regional sectors in Japan and Korea where vacancy rates remain exceptionally low.
Upon delving into specific sectors, DWS foresees prime logistics assets outperforming, yielding annual total returns spanning from 7.5% to 9%. Simultaneously, the enduring momentum of e-commerce is driving demand for leasing in regional logistics, propelled by a shortage of modern warehouses across numerous cities in the APAC region.
In their analysis, cities like Sydney, Melbourne, Brisbane, and Singapore emerge as alluring prospects in this sector due to their robust anticipations for rental growth. Furthermore, regional urban centres in Korea and Japan offer promising avenues for pioneering investments.
In terms of office leasing, CBRE's forecast indicates a potential reduction of up to 5%, driven by decreased demand in mainland China. Nevertheless, the trend of gravitating towards high-quality and eco-friendly buildings is expected to persist prominently. Ada Choi, the head of occupier research for CBRE in APAC, elucidated that as vacancy rates hit a 20-year peak in the first half of 2023 and are anticipated to rise further for the rest of the year, market dynamics will remain favourable for tenants. This is due to the wealth of options available for upgrading.
Within the office sector, DWS holds the viewpoint that the presence of millennial workers will underpin the success of value-added strategies. These strategies encompass endeavours to enhance assets, introduce next-generation office features, incorporate elements of biophilic design, and create collaborative spaces. The asset management firm anticipates that redevelopment strategies, especially for underutilized office spaces, will yield enhanced development margins, although this approach also entails heightened risks.
Furthermore, DWS lends support to the notion of multi-family housing as a modest yet noteworthy market with investment potential. This stance is reinforced by the prospect of tax incentives being extended to new residential built-to-rent (BTR) projects starting in 2024. The potential for robust rental growth is expected to establish a sturdy foundation for investment returns, as highlighted by the firm. However, it's essential to acknowledge that accessing properties of institutional grade might entail some developmental risks.
Advertisement
Facebook
Whatsapp
