Cap rates for Australia sees more movement than other Asia countries, on heightened market activity.
In Q3 2021, we noticed 10 of the 21 cities surveyed across Asia Pacific (APAC) saw quarter-on-quarter (QOQ) movements.
Australia markets experienced more cap rates movement and transactions in the previous quarter, especially in the industrial and logistics sector. More movement is expected in Asian cities once there is more clarity on the future financial situation of the Chinese property developer, Evergrande.
Key Highlights in Q3 2021:
- The sharpest movements have been in Australia's industrial and logistics sector, where cap rates have fallen by up to 0.6 percentage point (pp) QOQ. This cap rate compression reflects very strong demand for this asset class both in Australia and globally.
- In Seoul, logistics cap rates have likewise fallen 0.5pp to the low 4% range, reflecting demand for warehouse assets in a market which has been one of the top three investment centres in APAC so far in 2021. With ample liquidity and limited outbound investment opportunities, cap rates in South Korea may drop further, into the 3-4% range.
- Cap rates have been broadly flat in Asia cities, including those in China, where it is still seems too early to assess the impact of the financial situation of property developer Evergrande as well as broader stresses in the residential sector on commercial property asset values.