Tokyo remains the top city according to cross-border commercial real estate investors. Image – Canva.
  • CBRE's Asia Pacific Investor Intentions Survey covers all asset types
  • Investors are returning to office assets, with interest in logistics declining
  • Healthcare remains a popular sector

Sydney has moved four places up to fourth position as the preferred destination for cross-border real estate investment, a new investor survey has revealed.

CBRE’s annual Asia Pacific Investor Intentions Survey, which covers all asset types, found that 60% of investors intent to make even more acquisitions this year. The appetite for buying was strongest among Australian, Singaporean, Korean and Japanese investors.

Logistics remain the preferred investment sector – however, appetite for office assets is increasing, a trend that has been witnessed here in Australia.

Tokyo remained the number one city for the third consecutive year, followed by Shanghai, Singapore and Sydney.

“Sydney’s resurgence has been driven by improving office fundamentals, with declining incentives set to spur effective rental growth,” said Mark Coster, CBRE’s head of Capital Markets, Pacific.

“An undersupplied logistics sector struggling to meet rising e-commerce demand has been another draw for investors eyeing Sydney investment opportunities.”

Mr Coster noted that the survey responses predict to Asia Pacific commercial real estate turnover to increase by 5-10% in 2022, with Australia near the upper end of that range.

Australian domiciled investors have a net buying intention – that is intention to buy as opposed to selling – of 27%. This reflects ample liquidity with the CBRE report suggesting a tilt towards real estate in asset locations.

Sameer Chopra, CBRE’s Head of Research, Pacific, noted that yields are at record low level and with rising bond yields, rental increases are expected to drive future returns.

“We expect that in search of higher yields, investors will pursue value-add opportunities, such as upgrading older office assets to meet ESG mandates; core-plus investments; or acquiring prime assets with shorter Weighted Average Lease Expiries (WALEs) to negotiate more competitive rents.”

Top 10 commercial real estate cities in 2022 for cross-border Asia Pacific investors

  1. Tokyo, Japan
  2. Shanghai, China
  3. Singapore
  4. Sydney, Australia
  5. Beijing, China
  6. Hong Kong
  7. Seoul, South Korea
  8. Osaka, Japan
  9. Ho Chi Minh City, Vietnam
  10. Other regional Japanese cities
    asia pacific commercial
    Image supplied.

Logistics preferred, investors returning to office space

While 36% of investors said their preferred Asia Pacific investment sector was logistics, this is below the 44% result in 2021. This suggests investors are questioning whether pandemic-led  growth in demand for logistics can be sustained.

Interest in office assets has increased to 31% this year from 26% in 2021, thanks to an optimistic outlook for leasing demand due to a greater prevalence of hybrid working.

“Anecdotally, in Australia, we’re seeing this amongst tenancies which are sub 5000sqm. Small & Medium sized enterprises, alongside Government, have been the growth engines of office demand in 2021,” Mr Chopra said.

Healthcare and cold storage gain momentum

Perhaps not surprising given the pandemic and an ageing population across the developed world, healthcare (31%) remains a popular sector among investors, as does data centres (41%) and cold storage (35%).

However, real estate debt – which was one of the more popular alternative sectors  – has fallen out of favour with investors. This is likely thanks to ongoing debt-related difficulties currently being faced by mainland Chinese developers.

As previously mentioned on The Property Tribune, the majority of investors are actively adopting or integrating environmental, social and governance (ESG) criteria into their investments, such as by purchasing a building with green certification.

Additionally, to finance upgrades for existing assets, REITS, developers and fund managers are increasingly turning to green financing.

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