Portfolio Optimization, Placemaking and Niche Sectors
Emerge as Key Themes in Regional Commercial Real Estate Market
Vietnam, February 7, 2017 – 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.
“Asia Pacific’s commercial real estate market continues to acclimatize to a new normal of evolving demographics and less consistent economic growth. With the reality of low yields and sluggish rental growth, investors will be more diligent in 2017 when deploying capital and managing property assets,” said Steve Swerdlow, Chief Executive Officer, CBRE Asia Pacific.
“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.
Investors with a stronger appetite for risk will SEEK OPPORTUNITIES OUTSIDE GATEWAY CITIES in locations offering attractive pricing. Cities such as Hangzhou and Chengdu in China, and Osaka, Nagoya and Fukuoka in Japan will be attractive to investors. On the other hand, 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.
“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.
Capital Markets Sector Outlook:
- Tightening of capital outflows will inhibit overseas investment activities by Chinese buyers despite sustained appetite for global real estate assets.
- Japanese investors to ramp up their investment in overseas property markets.
Office Sector Outlook:
- Technology firms to lead office leasing demand across the region, supported by revenue and headcount growth.
- Financial sector leasing demand to be driven by domestic financial companies in larger markets including China, India and Japan.
- Co-working spaces to further consolidate its position as an important new source of office leasing demand.
Retail Sector Outlook:
- International brands continue to be lured by the region’s long-term consumption growth story and positive demographic trends.
- F&B expansion to remain strong, whilst leasing demand from sportswear brands to accelerate on the back of growing interest in health and fitness.
- Retailers to be more disciplined in store expansion, dedicating resources towards opening and/or upgrading flagship stores in core locations.
Industrial & Logistics Sector Outlook:
- Stable outlook with the fundamentals of demand, supply, and rentals all pointing to consistent growth in 2017.
- Digital shopping to boost sector demand with robust growth of e-commerce sector and deployment of more customer service-focused 3PLs adopting automation technology.
- Advanced manufacturing is becoming smarter and more connected as more robotic solutions are employed in the production process regionally.
The Asia Pacific Markets Outlook report series includes country-specific reports for Australia, Greater China, India, Japan, Malaysia, Singapore, South Korea and Vietnam—available soon on request, along with CBRE’s 2017 Global Real Estate Market Outlook report.