The situation for real-estate capital markets in Asia should be much more positive in 2015. Against a backdrop of sustained economic growth in the region, investor confidence should be strong across the full spectrum of real-estate asset classes. Compressed yields and a general lack of quality stock for sale have been pushing investment capital overseas in search of opportunities with better returns. It is likely that the outbound trend will continue in 2015. The difference in 2015 is that more capital will be heading to Asia at the same time. There will be plenty of traffic moving in this direction in the form of inbound investment lured by good long-term growth prospects in the region. We forecast that deal volume is going to increase given the greater amount of stock available for sale.
Due to cooling measures put in place by a number of Asian governments, sales volume has contracted and there is increased liquidity risk, posing a major threat to investors over the past couple of years. Looking ahead to 2015, it is likely that some cooling measures will be relaxed, particularly when more-realistic levels of supply come to market, and assuming, as is likely, that speculative purchases stay under control. Prospective investors should welcome these changes as they lower any liquidity risk. As well as seeing an increase of available stock, 2015 should also see more developments pitched at reasonable prices, resulting in a marked uptick in sales transactions. The situation contrasts with overseas markets, where yields have been compressed and existing investment-grade assets are increasingly difficult to find.
In addition to traditional real-estate investment funds, owner-occupiers will be more active and will represent a key group of purchasers in 2015. They will see brand-new commercial developments in non-core districts as opportunities to upgrade and consolidate their operations, taking advantage of the wide gap in rents between core and decentralized sub-markets. The same thinking is actually providing investors with opportunities to add value to their existing projects through repositioning them or converting them for other use.