Asia Pacific Real Estate Outlook Shifts Due to Delayed Rate Cuts: CBRE

Asia Pacific – July 30, 2024 – A rebound of Asia Pacific’s commercial real estate investment activity remains on hold due to delayed interest rate cuts and continuous repricing activity, according to CBRE’s 2024 Asia Pacific Real Estate Market Outlook Mid-Year Review.

Nevertheless, CBRE expects 2024 investment volume to increase slightly to 3%. A key variable will be Japan, where cross-border capital has waned a bit as investors look for markets with higher return potential.

“While investors continue to focus on active markets such as Japan and India, repricing in countries like Australia, New Zealand and Korea are largely done, so there are revival interests in both markets,” said Dr. Henry Chin, Global Head of Investor Thought Leadership & Head of Research, Asia Pacific for CBRE. “We expect further repricing activities in Mainland China, Singapore and Hong Kong SAR in order to see an uptick in investors’ interest.”

Office & Occupier

The office market continues to be impacted by the level of supply, leading to a high regional vacancy rate of 19% in the first half of 2024. Market leaders are Japan and India as both have shown robust leasing activity, driving a steady increase in regional gross leasing volume year-on-year. Mainland China’s slow recovery, characterized by cost controls and lease renewals, has offset this positive performance. CBRE continues to expect at most 5% gross leasing volume growth for 2024.

“Cost remains a key factor in renewal and relocation decisions. High fit-out costs have led many occupiers to renew leases, while some are opting for relocations to achieve cost savings and re-outfit space to enhance workplace experience,” said Ada Choi, Head of Occupier Research & Head of Data Intelligence and Management, Research, Asia Pacific, for CBRE. “The flight to quality will continue as occupiers seek premium spaces in prime locations.”

Retail

The key retail sectors such as food & beverage and sport goods are among those expanding their footprints. While vacancy rates in prime shopping precincts have fallen back to pre-pandemic levels, some retailers are expected to rein in their expansion plans now that they’ve rebuilt their store networks following pandemic-era closures.

Logistics

Logistics demand normalised faster than expected in H1 2024, with lease renewals favored over relocations due to high rents and fit-out costs. Despite a slight improvement in leasing activity in the second half of the year, full-year leasing volume is expected to be down from 2023.

Hotels

Except for the Maldives, the region’s hotel markets have seen year-over-year increases in Revenue per Available Room performance as of May 2024 year-to-date. Average Daily Rates have remained stable, driven by an 80 basis points increase in average occupancy levels, as airline travel rebounds.

To read the full report, click here.

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