Asia Pacific Real Estate Market Outlook Mid-Year Review (CBRE)

CBRE’s 2023 Asia Pacific Real Estate Market Outlook Mid-Year Review reviews the predictions we made at the beginning of 2023, and reveals our outlook for the rest of the year.

Our original forecasts from January were largely correct, although the subdued impact of mainland China’s re-opening has led us to push back predictions for the expected timing of the recovery by 6 to 12 months. While leasing momentum in occupier markets is strengthening, the investment volume is unlikely to recover before H1 2024.   

This report explores the key trends and forecasts that will shape Asia Pacific’s commercial real estate market for the rest of the year and beyond.

Economy
Core inflation along with a stronger than expected employment market have reduced the likelihood of a hard landing in the U.S., with CBRE expecting mild negative growth to occur in Q4 2023 and Q1 2024. With the upward interest rate cycle having been prolonged, rates are likely to stay high for longer.

Investment
Asia Pacific commercial real estate investment volume is unlikely to recover before H1 2024 due to insufficient yield expansion and the higher cost of finance. Japan will remain attractive to investors on the back of low interest rates and positive carry, and hence will continue to outperform. Investment sentiment elsewhere is expected to improve once the cost of borrowing starts to come down. Korea, which was the first market to implement interest rate hikes in the current cycle, is now witnessing an increase in investment activity now that the cost of finance has begun to fall.

Office
While CBRE’s market forecast has been largely accurate, the recovery of office space demand has lagged office-based employment growth. Office occupiers retain a prudent attitude towards portfolio planning amid the challenging macroeconomic environment. Although flight to quality and a focus on green buildings remain key trends, expansionary sentiment has been subdued.

Logistics
Although logistics demand continues to gradually moderate from pandemic-era highs, regional rents displayed resilience in H1 2023, with performance bifurcating between tightly supplied markets, such as Singapore (prime) and the Pacific, and oversupplied locations. Rental growth in markets with a supply shortage will nevertheless lose momentum as demand tapers off.

Retail
The tight job market and resumption of international tourism underpinned strong consumer spending in H1 2023, boosting expansionary sentiment among retail occupiers.

Hotels
However, the slow return of mainland Chinese tourists continues to weigh on the recovery; a trend that is also impacting hotels, with the recent rise in room rates now showing signs of plateauing.

This report was originally published in https://www.cbre.com/insights/reports/2023-asia-pacific-real-estate-market-outlook-mid-year-review

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