Transaction volumes remained at a relatively low level across APAC, however we are expecting a more active second half of the year when there is more clarity on rate movements, while vendors and purchasers recalibrate their expectations.
High inflation and rising interest rates have fanned out into more markets. Transaction volumes remained at a relatively low level across APAC, however we are expecting a more active second half of the year when there is more clarity on rate movements, while vendors and purchasers recalibrate their expectations.
Key Highlights in Q4 2022:
Office Sector
- Investors in Hong Kong were more cautious over supply outlook as the city was having a historical high vacancy rate at 14.7%1.
- In Manila, many companies continued to adopt a hybrid mode, putting pressure on space take-up. Landlords pushed vacant spaces in the market causing a slight decrease in rent. Capital value stood still in particular quality assets. There was a lack of open market transactions in Q4 to adequately assess the impact, but we are of the view that rising interest rate and high inflation made little impact as many players are with low leverage. As a result, a further drop in yield was seen for Q4 in a softening rental market.
Retail Sector
- Transaction activity remained low in Australia in Q4 with transaction volumes likely to return once vendor and purchaser pricing expectations realign.
- China property market had a quiet quarter due to the covid curb. The reopening of the country’s border from 8 January 2023 could boost growth prospects for China’s economy. It is a common expectation for a rebound in all industry sectors, in particular to retail and F&B consumptions. Prices and rents are expected to rise and sooner returning to the pre-epidemic level.
Industrial Sector
- In Australia, most market stakeholders were cautious on purchasing in virtue of uncertainty on when interest rates would stop rising and at what level it would settle at in the short to medium term. Prime assets are relatively resilient as rent continues to grow with a lack of superior real estate tactical capital allocation alternatives in the market. All in all, industrial property remains attractive due to continued rental growth, and stable and predictable net effective cash flows.
- The industrial/warehousing segment is still resilient in Bengaluru. Third party logistics (3PL) players and automobile companies are looking for investment and expansion opportunities. This increase in demand drove value to rise and led to a marginal decrease in the cap rate.
- In Hong Kong, despite its resilience and tight vacancy, imports and exports have decreased over the year and there was increasing concern on global economic downturn which resulted in a slight increase in cap rate.
1 Colliers data.
Download the latest APAC Cap Rates Snapshot | Q4 2022 below. For more real estate advisory insights across Asia Pacific, reach out to our experts CK Lau, Dwight Hillier, Kane Sweetman.
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