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Asia Pacific Cap Rates Snapshot | Q3 2022

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Business activities have started to get back to some semblance of normality in most markets across Asia Pacific


Business activities have started to get back to some semblance of normality in most markets across Asia Pacific. While the era of consistent office yield may appear to be over, there are signs of cap rates rising in some markets.  Overall retail yield is anticipated to remain stable in the near term. Industrial sector remains a relatively low-risk option for investment in most APAC markets. US dollar has risen by nearly 15% this year against some of the world’s most traded currencies. This amplifies the demand for cross-market real estate investment in some markets such as Japan. The depreciation of the yen and the Bank of Japan maintaining its low interest rate policy has created a strong appetite for real estate investment by foreign investors. 

Key Highlights in Q3 2022:

Office Sector
  • Some Investors in China are generally holding conservative views and are concerning over the softening of the economic conditions.
  • In Manila, new supply coming online exacerbated the already high vacancy rate in the office sector.  Business Process Outsourcing (BPO) allowed to extend their work-from-home arrangement which muted the office expansion plan.  Office rents continued to adjust downwards, while prices were more resilient has resulted in a slight compression on the yield.
  • There was a slight upward QoQ cap rate movement in office sector in Auckland and some Australian markets. The upward interest rate cycle, which was driven by inflation, changed the market conditions.   
  • In Australia, selective capital will flow towards high quality of premium office assets.  Hence, buyers and vendors continued to work through a re-pricing discovery phase during this round of interest rate cycle. 
     

Retail Sector
  • Retail sector was hit by the strict COVID measures in China. Beijing cap rate showed signs of edging up.
  • Retail sector is expected to recover when international travel in many cities roars back to normal, although it may take a while to go back to its pre-COVID level.
     
Industrial Sector
  • There was substantial logistic space pipeline in Beijing, Shanghai and nearby cities putting pressure on the rental market.  
  • In Manila, there was some observable downward movement on warehouse rents as vacancy rate has increased due to global economic concerns.
  • In Seoul, industrial cap rate trend slightly upward over the past quarter and office yield is expected to follow in a rising interest rate and high inflation environment. 
  • Dearth of transactional evidence in all markets covered in this report across Australia and New Zealand. Market sentiment and external economic factors have placed upward pressure on yields.  Some of this pressure is offset by the record low vacancy and unprecedented rental growth at present.
     
     

Download the latest APAC Cap Rates Snapshot | Q3 2022 below. For more real estate advisory insights across Asia Pacific, reach out to our experts CK Lau and Dwight Hillier.


Asia Pacific Cap Rates Snapshot | Q3 2022

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