Tokyo, Shanghai and Singapore are top three investment destinations for real estate investors in 2022, according to the findings of CBRE’s latest Asia Pacific Investor Intentions Survey. Tokyo retains top spot for the third year running.
The survey, which covers all property types, found that a majority of investors (60%) intend to make more acquisitions this year than in 2021, with the appetite for acquisitions strongest among Singaporean, Korean, Japanese, and Australian investors
“With overall investor appetite expected to remain strong, we are predicting 2022 to be a banner year for real estate investment across the region,” said Greg Hyland, Head of Capital Markets, Asia Pacific for CBRE. “In particular, Tokyo’s availability of low-cost financing, high liquidity and large volume of mature multifamily assets make it a market with continued strong appeal for international investors.”
Shanghai continues to attract considerable Asian capital, earning it second place on CBRE’s survey.
Office rents in the city are projected to stabilise in 2022 despite an influx of new supply because of solid leasing demand from finance, life sciences and technology firms. Singapore also continues to be a major destination with investors from Japan, Taiwan and beyond Asia Pacific drawn to the city’s strong office rental growth. The city has seen a series of acquisitions by international fund managers in anticipation of steady rental growth, limited new supply and strong leasing demand from technology companies.
Hong Kong SAR has returned to the top 10, with international capital lured by repositioning opportunities and price discounts in the industrial and hotel sectors. Sydney also saw resurgent interest driven by improving office fundamentals, with lower incentives set to spur effective rental growth; along with an undersupplied logistics sector struggling to meet strong e-commerce demand.
CBRE’s survey also revealed additional insights that are likely to shape real estate investment in 2022:
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.
“Yields are expected to remain stable at current levels and with governments bond yields rising, future returns are expected to be driven by net operating income. We expect investors, in their search for higher yields, to pursue value-added opportunities, such as upgrading older office assets to meet ESG criteria, and core-plus investment strategies such as acquiring prime assets with a potential for adjusting tenant mix or with shorter Weighted Average Lease Expiries to negotiate more competitive rents,” said Dr Henry Chin, Global Head of Investor Thought Leadership and Head of Research, Asia Pacific, CBRE.
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