Investors, tenants and landlords would be well advised to re-think their real estate strategies so they can adapt to a rapidly transforming environment, according to CBRE’s Asia Pacific Real Estate Market Outlook 2020.
Asia Pacific’s commercial real estate market can be expected to experience profound structural shifts in the new year, as low interest rates, evolving end-user preferences and technological innovation reshape the competitive landscape.
CBRE remains optimistic about the future but believes real estate occupiers and investors must dare to adapt in a fast-changing world.
CBRE’s Asia Pacific Real Estate Market Outlook 2020 identifies and explains the game-changing forces that expected to influence occupiers’ and investors’ strategies in 2020, which they have summarised as “DARE”:
D: Asia Pacific economies face three significant challenges in the form of deglobalisation, disinflation and demographics.
A: Office occupiers should remain agile; conduct more thorough assessments of market and environmental risks; and consider alternative markets, locations and property types.
R: Investors should adopt more realistic return targets and strengthen portfolio resilience by focusing on structural and defensive plays. Be prepared rerouting capital needs from developers to lower their gearing.
E: Retail will see further evolution as the structural shift online continues. Entertainment and experience-based elements will become even more prominent. In the logistics sector, occupiers must create more efficient distribution systems to accommodate e-commerce related parcel growth and rising costs. Landlords will need to enhance their service offering to meet occupiers’ evolving needs
“The ‘Phase-One’ trade agreement signed by the U.S. and China earlier this month should provide a welcome boost for the global economy in 2020. While we expect Asia Pacific’s real estate market to remain resilient, the sector will face challenges from de-globalization, disinflation and demographics. Ongoing geopolitical tensions will continue to impact business activity around the region, while inflation is likely to remain subdued,” says Dr. Henry Chin, Head of Research for APAC/EMEA, CBRE.
CBRE forecasts stable demand and modest rental growth across office, retail and industrial sectors. Office demand is poised for a mild recovery, while ample new Grade A office supply will ensure that most markets continue to favor tenants. Demand for brick-and-mortar retail space should remain stable, although retailers will continue to adopt a prudent approach to their real estate footprints. Logistics market fundamentals appear solid and the ongoing shift towards omnichannel retail will drive steady leasing demand from retailers and third-party logistics firms.
“The real estate investment market should continue to enjoy ample liquidity in 2020, supported by low interest rates and a wider cap rate spread across all three sectors. Low returns from fixed income investments will encourage Asia Pacific institutional investors to diversify their portfolios into commercial real estate. Asia Pacific (APAC) commercial real estate investment turnover is expected to remain solid,” notes Dr. Chin.