Largely muted cap rates across Asia Pacific.
Uncertainty surrounding COVID-19 continued to put potential transaction activity on standby mode in Q42020. We saw largely muted cap rate fluctuations across the region.
Key Highlights in Q4 2020:
- In India, notable exceptions included dips in industrial cap rates as the region-wide proliferation of e-commerce for both F&B and retailing generates sustained demand for warehousing and logistics facilities.
- Mumbai’s retail cap rates edged upward as drops in rental and vacancies exert downward pressure on asset values.
- Elsewhere in Manila, we witnessed a drop in rental values which are yet to be reflected on asset values.
- In Australia’s office sector, we expect modern assets with long term leases to continue showing resilience in value as investors focus more on low-risk buying opportunities.
- While the underlying appetite for office assets in Australia remains healthy, transaction volumes is temporarily being affected by international travel restrictions which has impeded upon site visits. Further, limitations brought about by the foreign investment approval process has posed uncertainties on inbound capital flows. However, recent inroads to policies have been made which appear optimistic.
Overall, we believe that varying expectations on economic outlook has translated into mismatch between buyers’ and sellers’ price expectations.
The gradual restoration of activity will drive capital back to office, retail and industrial sectors, in turn affecting their cap rates later in 2021.