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Although the pandemic has faded into the background, 2022 was still a tumultuous year highlighted by events such as the war in Ukraine, the subsequent energy crisis, and persistent inflation leading to interest rate hikes. A global recession is likely, but the Japanese economy looks to fare better due to its belated reopening. The majority of investors in Japan are still pursuing new investment opportunities, and 2023 will see more participants. The matured Japan market will welcome a more diversified pool of investors, which will give the market more liquidity and greater potential for growth.

This report was originally published in https://www.savills.co.jp/research_articles/167577/209392-0

On December 7, 2022, the Chinese government announced a 10-point plan signalling a shift away from its zero-tolerance COVID-19 policy. The measures were announced as China’s short term economic indicators continued to weaken, with local governments in particular coming under acute financial strain.

Retail and tourism are set to be the main beneficiaries of the policy easing. Given the performance of other Asia Pacific markets since their relaxation of pandemic-related policies, CBRE expects retailer expansion to pick up as early as Q2 2023, supported by rising demand for prime retail space and the bottoming out of shopping mall rents as infections gradually subside and the population adjusts to a living with COVID-19 policy.

With regard to the office market, the easing of pandemic restrictions will bring about an increase in site inspections. A rebound in office demand is likely to follow in another three to six months as occupiers’ business outlook brightens along with the economic recovery.

Improving economic fundamentals should boost commercial real estate investment volume in 2023, which will continue to be driven by domestic institutions. With the Five-Year Loan Prime Rate (LPR) standing at an historically low 4.3%, cheaper lending costs will strengthen China’s relative appeal to cross-border investors.

CBRE recommends long term core investors focus on built-to-rent multifamily, business parks and industrial parks around tier I cities, along with trophy office assets in Shanghai and Beijing. Opportunistic investors are advised to target distressed assets. Mainland China’s re-opening will eventually benefit the retail and hotel sectors in Hong Kong SAR, Japan and Thailand, as well as the student living and residential sectors in Australia.

This report was originally published in https://www.cbre.com.cn/en/insights/briefs/China-Brief--China%E2%80%99s-shift-from-zero-covid-to-reopening-seen-as-hugely-beneficial-to-real-estate

• Tenant enquiries and site visits increased in the surveyed period, largely driven by the retail and industrial sector. Activity in mainland China continued to be constrained by strict pandemic-related measures.

• Demand for both traditional and flex office space cooled as many occupiers switched to wait-and-see mode amidst the dimmer economic outlook. The appetite from industrial sector also decreased as respondents saw more consolidations.

• While the outlook for rents in Korea, Singapore and Australia turns more positive in the surveyed period, lagging markets like mainland China also expected a slower rental decline.

• Regional leasing sentiment remained largely stable. Although mainland China was the weakest performer, a more positive outlook is expected along with recent relaxation of zero COVID policy. Landlord strength continued to decline as the market shifted further in favour of tenants.

This report was originally published in https://www.cbre.com/insights/briefs/asia-pacific-market-sentiment-survey-december-2022

Asia Pacific’s key office markets tell a story of resilience overall, with steady demand in some markets, surging supply in others – and some cities in India experiencing both surging demand and supply.

As has been the case since the start of the COVID-19 pandemic, the Asia Pacific office market continues to demonstrate its resilience. Fully 153 million square feet (msf) of office space has been absorbed across the region’s top 25 markets since the end of 2019, with 47msf of that occurring in the first nine months of 2022. Indeed, Asia Pacific continues to be the only region to record consecutive quarters of positive net absorption throughout the pandemic.

The broad outlook is for this to continue, though inevitably with nuance at the local level. Full-year office demand in 2022 is expected to reach 65msf, on par with the 63msf absorbed in 2021 and well above the pandemic lows of 2020. A modest improvement is forecast in 2023, with net absorption projected to reach 71msf (+9% y-o-y), before growth stabilises at around 5% per annum through to 2026. While this represents robust demand, it comes at a time of heightened supply as projects that were delayed in the early period of the pandemic regain momentum. Following the 112msf of new supply in 2022, a further 130msf is expected to be delivered in 2023 before slowing to less than 100msf from 2024 onwards. Inevitably, with supply outstripping demand in the near-term, regional vacancy is forecast to soften further, rising from 12.5% pre-pandemic to reach a little over 18% in 2023, after which it is expected to hold steady.