Investors will continue to retain a strong appetite for Asia Pacific commercial real estate in 2017, owing to a low interest rate environment and supportive longer-term regional macroeconomic fundamentals. However, overall investment activity will likely be influenced by tight pricing and limited availability of investable stock, according to CBRE’s 2017 Asia Pacific Real Estate Market Outlook report.
2017 still be challenging
“The political and economical environment will ensure that 2017 will remain challenging compared to previous cycles. Investors remain optimistic though and will continue to seek value in real estate, especially Asian institutional investors who continue to increase their allocations in this sector,” said Dr Henry Chin, Head of Research, CBRE Asia Pacific.
According to CBRE, investors in Asia Pacific will be more creative this year when formulating their investment strategies in order to achieve target returns. Potential strategies employed by investors will include adding value by asset repositioning or asset enhancement of existing properties with lifestyle amenities and services.
Meanwhile, concerns over infrastructure and transportation will ensure that occupiers will remain cautious towards committing to space in decentralized locations in emerging Asian markets such as India, the Philippines, Vietnam and Indonesia.
Focusing on portfolio optimization
“The low yield environment will continue to encourage investors to seek opportunities outside conventional asset classes and take advantage of new demand resulting from changes in consumer behavior,” said Dr Chin. “Student housing has already attracted strong interest from institutional investors given the rapid increase of international students in many markets, whilst the ageing population remains a prominent theme in the region’s real estate investment market, creating demand for senior housing, healthcare and medical centers.”
Global economic uncertainty has resulted in occupiers focusing on portfolio optimization. Specifically, companies will be more cautious towards investment and expansion, executing strategies that improve operational efficiency. Occupiers will invest deeper in market and labor analytics when committing to cost-efficient office locations and implementing employee satisfaction initiatives including accessibility and workplace.
Softening demand and new supply will drive an emphasis on placemaking and prompt landlords to be more creative and proactive in managing their tenant community. Building owners will design and manage their properties and surrounding areas to create a distinct identity in order to attract and retain tenant.
Technology will be leveraged to better understand building usage and tenant requirements, as well as improving the connectivity amongst building users. Within retail, retailtainment will broaden tenant types for experience-seeking consumers.