Office and hotel property investments in APAC to jump by up to 30% this year

Value-add strategies will prove to be especially useful in the office market.

As the world slowly reemerges from the grim impact of the pandemic, JLL expects office and hotel investments to increase by 20% to 30% in 2022. 

According to JLL, in most cities across Asia, demand and occupancies of modern, Grade A office buildings have outperformed the market as the pandemic has heightened awareness of quality, health and safety, and sustainability. We expect a sharp increase in value-add strategies to redevelop or retrofit older offices. 

Here’s more from JLL:

In the last five years, awareness of sustainability issues has increased but few companies in Asia took action. In 2021, JLL found that only 20% of corporate occupiers and investors have adopted net-zero carbon goals and committed to a decade of action to achieve them by 2030.

This has changed in the last year and a growing number of investors have actively changed their investment criteria in anticipation of rising fund flows towards decarbonisation strategies, evolving government regulations and importantly, changing tenant preferences. 

We expect the adoption of net-zero carbon targets and green lease clauses by corporate occupiers in Asia Pacific to double by 2025. The majority of occupiers and investors agree that employees in the future will demand green and sustainable workplaces. 

Inflation-linked assets to benefit from tighter labour markets 

Inflation expectations have increased as global economies emerge from the pandemic. We expect goods inflation and supply-side challenges to subside over time, but the longer-term upside risks for inflation could come from services and wages. For most Asia Pacific economies, inflation rates are projected to rise in 2022 and range between 1.5%-2.5% vis-à-vis 0.5%-2% in 2017. 

We expect more investors to consider assets that can benefit from inflation, especially to shield themselves from the impact of expected interest rate increases. Some of these assets include retail, hotels, residential, and offices where rents are tied to consumer prices or inflation indices. Assets with shorter lease expiries are also favoured, given that it provides landlords greater opportunities to raise rents.