Asia Pacific Commercial Real Estate Investment Recovery Now Expected in Mid-2024: CBRE Survey

Asia Pacific – November 9, 2023 – Most investors have adjusted their expectations for the recovery of commercial real estate investment activity in Asia Pacific to mid-2024 amid a prolonged high interest rate environment and ongoing capital markets headwinds, according to a new CBRE survey.

The survey reveals that only 12% of respondents have observed an improvement in investment activity in 2023. This contrasts with CBRE’s previous survey in April, where 73% of investors expected a recovery this year. The weak risk appetite among investors, coupled with limited expectations of interest rate cuts in the first half of 2024, has resulted in continued selling pressure across most of Asia Pacific, with the exception of India and mainland China, which show stronger buying intentions.

Next year’s volume recovery is projected to initially be led by Singapore in Q2 2024, followed by New Zealand and mainland China in Q3 2024, and Korea in Q4 2024. Australia and Hong Kong are anticipated to see recoveries beginning in 2025. CBRE expects APAC investment volume growth of 5% for full-year 2024.

“A recovery in investment activity is not expected until mid-2024, with some exceptions as India is having stronger buying intentions while Japan’s low interest rate still attracts international capital,” said Dr. Henry Chin, Global Head of Investor Thought Leadership & Head of Research, Asia Pacific for CBRE.

The survey identified a widening price expectation gap between buyers and sellers for assets with strong fundamentals, such as multifamily properties, institutional-grade logistics facilities, prime shopping malls, cold storage and data centres. While institutional-grade logistics remain the most popular sector, the survey revealed increased investor interest in retail properties as well. Private investors continue to display the strongest buying appetite, whereas real estate funds and property companies expressed the strongest intentions to sell.

“Investors anticipate further cap rate expansion across nearly all markets and sectors in Asia Pacific over the next six months as financing costs remain elevated. This has prompted investors to explore alternative or niche sectors offering higher yields, with real estate debt gaining the most traction,” said Greg Hyland, Head of Capital Markets, Asia Pacific for CBRE.

CBRE’s survey examined investment sentiment on market conditions and capitalization rates for stabilized properties. Capitalization rates—usually called cap rates—measure a property’s value by dividing its annual income by its sale price. A lower cap rate generally indicates a higher value. To read the full report, click here.

Notes to editors

CBRE’s Q3 2023 Asia Pacific Cap Rate Survey was conducted from October 3-17, 2023. Cap rate ranges are best estimates provided by CBRE professionals based on recent trades in their respective markets, as well as communications with investors. The ranges represent the cap rates at which a given asset is likely to trade in the current market. Cap rates within each subtype will vary, occasionally falling outside the stated ranges, based on asset location, quality, and property-specific opportunities for net operating income (NOI) enhancement.

The cap rate assumes no leverage is used. It is the ratio of the NOI to the acquisition price of the asset (NOI divided by acquisition price). The NOI calculation is based on net income less operating expenses.

Capital markets respondents provide NOI yield without leverage while Valuation & Advisory Services respondents provide the capitalisation rate (net).

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