Price boundaries are being pushed.
Real estate investment volume in Asia Pacific is expected to hit USD611 billion in 2017, according to Cushman & Wakefield’s The Atlas Summary 2017, which analyzes and predicts future trends in real estate investment activity across the world.
While this amount is only a marginal 1.6% increase over 2016 (which saw an APAC investment volume of USD601 billion), it accounts for 44% of the total globalrea l estate investment volume expected for 2017 of USD1.39 trillion. North America and EMEA’s real estate investment volumes for 2017 are estimated to be 34% and 22% of global volume respectively.
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Sigrid Zialcita, Managing Director, Asia Pacific Research at Cushman & Wakefield said, “Record deals for office buildings and land sites punctuated the Asia Pacific investment landscape last year, with notable deals sealed by developers mainly in the core markets, demonstrating continued strong appetite for assets and build-to-core opportunities.”
In 2016, developers paid top prices in Singapore and Tokyo while Mainland Chinese developers continued to push price boundaries in China’s top tiered cities and Hong Kong. Chinese developers also tightened its grip over development opportunities in the territory, accounting for over 50% of land sales since 2016.
“This positive investment momentum in Asia Pacific is expected to continue in 2017, with good economic performance sustaining investor interest and delivering a steady increase in demand for modern commercial space from local, regional and global investors. However, given the uncertain economic environment, means that global diversification in core real estate should remain a favoured strategy even as some investors grow bolder in experimenting in new markets,” she added.
In 2017, the office sector in core markets such as Sydney, Melbourne and Tokyo remain favoured. Core and core plus strategies will continue to target Japan and Australia but with supply limited in these markets, the interest is likely to shift to other investment targets such as core cities in China, Singapore and South Korea, as well as core-plus markets in the secondary cities of core countries.
Outsourcing trends will continue to push demand in the leading tech hubs while co-working will add to demand in gateway cities. Some of the leading emerging market opportunities will be found in Asia, particularly if economic conditions stabilize and reforms continue. The region overall is in a stronger position than in past cycles with economic resilience generally up.
Patterns of performance will however polarise further as a function of macro-economic risks. The changing and polarizing nature of the monetary cycle and quantitative easing will add to uncertainty. Investors need to focus on the fundamentals and on what makes a city and a property work for its occupiers.
Hence the current pressures on the market are only going to increase: be that the pressure to find stock, the pressure to raise prices or the pressure to find new areas of opportunity.
“The changing monetary cycle is an added dynamic that will likely define the investment scene in the region this year. The weight of capital chasing core assets will remain undiminished and investors will have to broaden their approaches and diversification strategies to take into account opportunities that reflect changing trends in demographics, technology, mobility and urban function. Next core strategies and counter-cycle investing will gain credence as the region is set to enter a new phase in the investment cycle,” noted Zialcita.
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