- Investors are becoming more aware of growth opportunities in South Korea and India.
- Nearly 60% of APAC investors expect regional economic growth to contribute to the real estate environment.
- More investors note they will be fully assessing the ESG performance of their assets.
Investment activity is expected to increase at a healthy rate across the Asia Pacific region this year, according to Colliers‘ 2024 Global Investor Outlook.
Colliers managing director of global capital markets Asia Pacific, Chris Pilgrim, noted 2024 looks to be a more positive year than 2023, due in part to pent-up equity.
“The depth of capital in most Asian markets has to diversify,” said Pilgrim.
“We were in one market recently where out of the five large state institutions, all signalled their intentions to significantly increase their allocations to real estate over the next few years.”
Where are investors heading in 2024?
Pilgrim said investors are aware of the growth opportunities in quickly maturing markets such as India and South Korea.
“We anticipate a more dynamic year ahead where the ability to act quickly, dig deeply into markets and sectors to identify value, and forge productive partnerships will be key to making the most of the region’s resurgence.”
Chris Pilgrim, Colliers
Colliers managing director and head of capital markets South Korea, Sungwook Cho, said despite elevated interest rates, the Korean commercial real estate market continues to expand in both the investment and leasing sectors.
“Unlike other global cities, struggling with a return to the office, fundamentals in Seoul remain very strong with high demand and vacancies at an all time low,” he said.
“Rents will continue to rise amid stable demand and rising inflation.”
Moreover, according to a Colliers survey, almost 60% of APAC investors expect regional economic growth to make a positive contribution to the real estate environment.
The data also illustrates an increasing proportion of investors planning to boost real estate allocations, with three quarters of APAC respondents planning to dedicate five per cent to 20% of assets under management (AUM) to real estate in the future.
A high amount of activity is expected from investors from within the region, with 66% of APAC respondents planning to invest in Asia Pacific in 2024; a modest improvement from 62% in 2023.
Australia’s outlook
Things look optimistic across Australia’s office, industrial and retail sector going into 2024, according Colliers Australia CEO, Malcom Tyson.
“Premium office rents and investor appetite will continue to elevate this asset class above the rest of the sector, with the yield spread between Premium and A Grade assets set to expand,” he said.
“Similarly, the spread between Premium and B Grade office asset yields is likely to expand, as appropriate risk and costs are priced back into purchasing decisions.”
Moreover, Tyson predicts the resilience of the industrial market to hold strong due to tight incentives, low vacancy and rental growth.
“We predict rental growth for a market that is currently renowned for the tightest vacancy rate globally (one per cent) and will continue to exceed the historical average rate, since 50% of industrial supply for 2024 is already pre-committed.”
Malcom Tyson, Colliers Australia
Tyson added that demand will outpace market supply of Australian retail centres.
“Existing retail assets will reap the benefits of an undersupply of 2.2 million sqm of floorspace nationally by 2032, potentially absorbing an additional $20.5 billion in sales by today’s market metrics.”
Cross-regional real estate investment to be reciprocated
Pilgrim noted that although there is a narrative that on-shore investment has increased globally, in early 2023, Singapore was the largest deployer of capital into global real estate with the majority of its proportion invested outside of Asia Pacific.
“Japan has also increased its position as a major source of capital for global real estate with 60% in H1 invested outside of Asia Pacific across the top five geographies,” he said.
“Importantly, as we have seen in 2023, we expect continuation of the trend in 2024 that cross-regional real estate investment will be reciprocated, with North American and European investors developing strategies across Asia Pacific.
“We expect the APAC region will continue to drive global investment levels in 2024 with a growing depth of capital.”
Other highlights from the survey
According to the survey, office and industrial sectors continue to be the favourites among investors. A quarter of investors surveyed named industrial and logistics as their preferred sector, 23% were for offices, followed by multifamily, also known as build-to-rent, at 14%, and retail and hotels coming in at 11%.
A growing number of APAC respondents also noted a full assessment of the ESG performance of their assets.
