What trends will impact APAC real estate investments this year?

Logistics remains investors’ most preferred sector, with office being a close second.

CBRE’s latest Asia Pacific Investor Intentions Survey revealed some interesting insights into the future of Asia Pacific real estate investment in 2022. 

Investors remain attracted to the logistics sector, but more investors are shifting towards office assets as hybrid working slowly becomes the norm in most cities. Cold storage, healthcare assets, and ESG investments are also increasing in popularity.

Here’s more from CBRE:

Logistics still preferred; investors return to office sector

While logistics continues to be the preferred sector (36%), interest has softened (down from 44% in 2021) as more investors question whether pandemic-led demand growth can be sustained. More investors are shifting their sights to office assets (31% in 2022 vs 26% previously) on a more optimistic outlook for leasing demand after the introduction of hybrid working was found to have only a negligible impact on brick-and-mortar office requirements. The spread of the Omicron variant is not expected to substantially derail the recovery of office demand, evidenced by a growing number of leasing enquiries related to office expansions.

Cold storage and healthcare gain momentum

Among alternative assets, data centres continue to be the top focus (41%), while demand is expected to strengthen for cold-storage (35%) and healthcare (31%). Pandemic-driven structural changes have put cold storage and healthcare properties in the sights of investors as life sciences companies continue to perform well. Real estate debt, one of the more popular alternative sectors among investors, has garnered less investor interest in this year’s survey. All signs point towards ongoing debt-related difficulties faced by mainland Chinese developers as a likely reason. 

Growing appetite for ESG investing 

More investors (56%) have already adopted or are integrating environmental, social and governance (ESG) criteria into their investments, including prioritising the purchase of buildings with green certification and retrofitting existing properties to enhance resource efficiency. To finance upgrades for existing properties, developers, REITs and fund managers are increasingly turning to green financing. 

Asia Pacific commercial real estate investment volume rose by 30% y-o-y to US$140 billion in 2021. The upbeat overall mood has led CBRE to forecast that total investment turnover will increase by 5% to 10% to around US$150 billion in 2022. Should this total be achieved, it would set a historical high for annual commercial real estate transaction volume in the region.

“A low base of comparison and the near total absence of local COVID-19 cases combined to support a solid economic recovery in 2021. However, a resurgence in local COVID-19 cases at the beginning of 2022 is likely to weigh on economic momentum in the early months of the year. While cross-border travel remains impeded, slower economic growth and potential interest rate hikes will drag on this year’s investment volume. However, downward pressure on capital values will ease and vacancy and rents stabilise,” said Marcos Chan, Executive Director and Head of Research, CBRE Hong Kong.