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Key findings:

• Australia: Across almost all the Australian cities covered, cap rates in all sectors exhibited an upward movement quarter-on-quarter. Industrial assets in Australia with long lease expirations and low fixed-term rent experienced downward pressure on values during the last quarter.
• China: In China, investment activity remains subdued with only individual investors and insurance institutes actively seeking out discounted assets and adopting a cautious approach to investment. This has resulted in subdued market sentiment in the property sector for Beijing and Shanghai compared to Q2. To vitalize the market environment, the central bank of China has been lowering the Loan Prime Rate (LPR) to alleviate the burden on loans, with the objective of unlocking resources for consumption and promoting nationwide GDP growth. In Beijing and Shanghai, the industrial sector experienced a wave of new supply as the take-up of existing stock slowed down. The government’s release of more industrial and logistics land resulted in an augmented supply in the market.
• Hong Kong: Hong Kong interest rates have continued to gradually increase over the past year. Asset values are under increasing downward pressure, which is beginning to be reflected in pricing. Vacancies remain high and rental prices experienced downward pressure across all sectors.
• India: In Bengaluru, Q3 office transaction volumes remained similar to the previous quarter, with a few transactions driven by individual investors as institutional players were less active. Deal sizes were smaller but more resilient, resulting in a marginal downward change in the cap rate in the office segment. In Mumbai, the retail sector is anticipated to gain traction in the near future, driven by demand from the luxury segment and the release of additional supplies of quality organized retail assets. Mumbai industrial demand remained strong in Q3, and the compression in the cap rate was attributed to lower availability of Grade A stock, coupled with a positive outlook from large institutional investors towards the sector. The investors were willing to trade off lower current yields for anticipated future growth in the sector.
• Japan: Some investors may consider Japan a risk averse market for real estate investment since the start of the interest rate hike, primarily due to its relatively accommodative monetary policy. The sales volume of foreign investments in real estate has yet to witness a significant increase, although sentiment and interest remain strong. The Tokyo office sector performed well in Q3, with occupancy rates remaining at a healthy level, especially when considering the challenges faced by some other cities in terms of take-up. This is driven by the return to office culture – government statistics indicate that the hybrid working ratio in Tokyo was 44% in mid-2023, down from a peak of over 64% in 2021.
• Korea: Seoul office assets remain in high demand, with rental levels holding firm for landlords. However, there is increasing downward pressure on values due to a lack of liquidity in the market.
• New Zealand: In Auckland, there has been upward movement for more than a year in the office sector. Transactional activity remained subdued over the last quarter as investors continued to take a cautious approach to the market. The Reserve Bank of New Zealand has maintained a steady Official Cash Rate in its last three monetary policy meetings, indicating that rates are at or near their peak in the current cycle. With interest rates stabilising it is anticipated that greater clarity over asset pricing will emerge. This, in combination with the election having been completed, is likely to result in an uplift in sales activity during the final quarter of 2023 ad into 2024.
• Singapore: Cap rates across sectors remain subdued, with a lack of sales evidence to support movement. Increasing lending costs are putting pressure on many investors and owners. However, there are other investors with deep pockets who are taking advantage of this opportunity to acquire assets for long-term investment.

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The real estate market has experienced a significant change due to the global inflation and rise in interest rates in the last two years. Moreover, the sector has been undergoing a transformation driven by technological innovations, which has changed the outlook and expectations of the market participants. In response to the persistent inflationary pressures, the regulators in the APAC region have adopted various measures to protect the stability and integrity of the real estate market in Q2 of FY24.

One of the common themes across the region is the implementation of stricter anti-money laundering rules, which aim to increase the transparency and accountability of the transactions. For example, Australia, India, Singapore and Japan have all introduced new or enhanced regulations to combat money laundering in the real estate sector.

Another trend that is shaping the real estate market in the APAC region is the growing emphasis on environmental sustainability and social responsibility. Many developers and builders are adopting net zero targets and improving their ESG credentials by incorporating green technologies and practices into their projects. This not only reduces the environmental impact of their operations, but also creates value for their customers and stakeholders by enhancing energy efficiency and reducing energy costs. Therefore, by aligning their strategies with tech-enabled initiatives, they are creating a more resilient and competitive market.

These developments indicate that the APAC region is preparing for a new era of opportunities and challenges for investors and developers in the housing and commercial real estate sectors. The regulatory updates in Australia, India, Japan, China, Singapore and Hong Kong provide a framework and guidance for navigating the changing market conditions and expectations. They also reflect the diversity and dynamism of the region, which offers a range of prospects and potentials for diverse types of real estate investments.

In this edition of APREA Real Assets Bulletin, we have covered the regulatory updates pertaining to green transformation in real estate, tech-led strategies and initiatives adopted to streamline the real-estate transactions, and risk-mitigation measures undertaken by APAC economies through anti-money laundering measures for safeguarding the real estate sector.

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The electric vehicle (EV) market in Asia Pacific has grown significantly over the past two years, with the region accounting for nearly two-thirds of global EV sales in 2022. 

As EV adoption continues to gather pace, demand for public charging infrastructure in Asia is also rapidly increasing, primarily due to the prevalence of apartments where the installation of private chargers is subject to regulatory restrictions and administrative barriers.

The growing number of EVs in Asia Pacific will require a significant increase in charging facilities. CBRE estimates the number of public charging points across the region will rise from around 2 million in 2022 to around 10 million by 2030.

All of these converging trends present a significant opportunity for real estate owners and investors to gain access to or expand their presence in the EV public charging infrastructure market.

This report was originally published in https://www.cbre.com/insights/reports/how-will-electric-vehicles-impact-real-estate-in-asia-pacific

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Applying climate analysis to MSCI’s Real Capital Analytics database of global property holdings, we can see a broad range of aggregated physical climate risks across real estate in selected Asia-Pacific cities. As we previously showed for cities worldwide, these risks were not equally distributed within each city.

Once again, location and topography were decisive factors behind the impact of physical climate change, reinforcing the idea that investors may wish to consider climate risk at the individual asset level, rather than relying solely on market-level data.

The charts below illustrate Average physical risk vs. risk distribution across major Asia-Pacific metros

Physical Climate Risk

Average for metro and asset-level

 

Physical Climate Risk Band

% of properties

 

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