APAC commercial property investments to reach record-high $150b in 2022

It is expected to increase the $147b investments in 2017, CBRE said.

Commercial real estate investment for the Asia Pacific in 2022 is expected to grow by at least 5% to $150b, exceeding the record-high $147b in 2017, according to CBRE. 

The recovery is expected to be driven by strong investment activity from close-ended real estate funds, real estate investment trust (REIT) and institutional investors, including those that paused acquisitions at the start of the pandemic, it said. 

CBRE also estimated that institutions in the region have up to $500b in equity on their balance sheets that are waiting for deployment.

For 2022, logistics assets were seen to remain as “keenly sought after” by investors, said Greg Hyland, head of Capital Markets for Asia Pacific at CBRE.

Meanwhile, interest in premium offices targeting new economy tenants is expected to strengthen due to return to the office and requirement by occupiers to meet environmental, social and governance commitments, he said.

“While demand for retail and hotel assets will experience some near-term impact from the emergence of the Omicron variant, these sectors will continue to attract interest from value investors who are positioning for a recovery,” Hyland said.

Henry Chin, global head of Investor Thought Leadership and head of Research for Asia Pacific at CBRE, said the steady economic growth and low interest rates were expected to support the recovery of the commercial real estate across the region.

“Active asset management and enhancement with a focus on ESG and repositioning properties will be prominent themes for investors in 2022, fuelled by narrowing prime yield spreads and an emphasis on rental income,” he said.

CBRE expects office leasing activity measured by net absorption to increase up to 10% year-on-year in 2022 due to rebound in expansionary demand. Grade A office rents in the region is seen to grow around 1% in 2022, with Singapore leading the growth at over 10%.

The Omicron variant is also unlikely to “substantially derail” the recovery of office demand as companies gain confidence to return to the office and hybrid workings, it said. CBRE added that flight-to-quality relocation and newer, greener buildings are expected to support the region's office market recovery, following the longest downward rental cycle in 20 years.

The logistics rents were expected to grow the 12th consecutive year across all major markets, CBRE said. Hong Kong is expected to lead the logistics growth as it is seen to benefit from trade growth when the borders with mainland China are reopened.

The Omicron, however, poses uncertainty to the retail market outlook, but CBRE retains its positive outlook for the asset class this year “as more markets return to growth, despite the delayed recovery of tourist-oriented retail.”

Regional retail rents are expected to grow mildly as the demand is focused on “good quality assets in prime locations in a tenant-favoured market,” it said.