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Asset Management / Wealth Management
APAC real estate markets to pursue recovery
Office sector to remain strong but logistics and data centres to attract more attention
Tom King 7 Dec 2021

Despite renewed uncertainty caused by the latest Covid-19 variant Omicron, property markets in the Asia-Pacific region look set to continue their recovery from the pandemic.

According to global property consultancy Knight Frank’s Asia-Pacific 2022 outlook report, economies that have been restrained by lockdowns in 2021 could provide above-trend growth next year.

In particular, Southeast Asia's emerging markets, Australia and Japan will likely exhibit above-trend growth while the rest will revert to longer-term averages, the report says.

Kevin Coppel, Knight Frank’s managing director for Asia-Pacific, says: “As Covid-19 restrictions are relaxed, pent-up demand will support a solid recovery across the region. However, the trend will not be linear, and inevitably there will be bumps along the way in the form of new variants, supply disruptions, or ad-hoc restrictions. Fortunately, such setbacks are likely to be temporary and not distract markets from a solid broad-based recovery.”

With most governments in APAC moving beyond lockdowns to an endemic stage and now better placed to respond to new variants, as vaccinations continue to gather pace, a number of indicators are pointing towards recovery in 2022, including low interest rates and high inward investment. Along with pent-up demand, Knight Frank expects to see growth across the region’s residential and commercial sectors.

Among the takeaways in the report are a 20% uplift in commercial transactions and a 3-6% growth rate for residential prices forecast for next year. Rents in the logistics sector are expected to increase 2-3%, and with work from home developing into the default arrangement for many firms, office rents will likely see more modest growth.

Capital markets

Real estate investment activity in the region is expected to be driven by growing business confidence, the gradual easing of travel restrictions, and the significant amount of capital attracted to the real estate sector.

While the office sector will remain a strong segment, Knight Frank expects to see a clear rise in investor allocations to sectors linked to structural changes such as logistics and data centres.

The industrial and retail sectors are forecast to see similar levels of investment interest in 2022, with retail experiencing a shorter-term bounce and industrial maintaining an upward trend over the next few years.

The United States has ranked as the most active capital source in the APAC region by volume since 2013, but lost out in the number of deals to Singapore in the first half of 2021. The report expects 2022 will continue to see the two markets fighting for the top spot of capital spend in the region.

Asian-based sovereign wealth funds will continue to deploy capital at a considerable scale throughout the region, with Singapore’s GIC likely to keep its interest in prime offices in Australian central business districts and logistics opportunities in mainland China.

South Korea’s National Pension Service is expected to ramp up capital deployment to overseas assets and target key gateway cities in the region with global partners. The pension fund, which has U$778 billion in assets under management, was last week reported to be the buyer of the 5 Broadgate complex, which is UBS’s London headquarters, for around 1.25 billion sterling pounds (US$1.65 billion).   

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