A recent research report by CBRE, published in May, highlights a 14% year-on-year decline in real estate investment activity across the Asia-Pacific (APAC) region during the first quarter of 2024. The total transaction volume for the quarter reached US$24 billion (approximately S$32 billion). Japan emerged as the most active market, accounting for nearly 30% of the region’s total volume, with transactions amounting to US$7.4 billion.
The office sector experienced the most significant increase in capitalization (cap) rates across APAC, driven primarily by cities in Australia and New Zealand, alongside notable developments in Beijing, Shanghai, and Jakarta.
Given the current market conditions, cap rates are expected to continue their upward trajectory over the next six months. CBRE anticipates that cap rate expansion will occur across most asset classes, with decentralized and secondary properties likely to see the most pronounced increases.
Looking ahead, the delayed interest rate cuts, coupled with investors’ cautious approach to risk, are expected to continue to weigh on real estate investment volumes in the APAC region. While investment activity remains robust in Japan, India, and Singapore, CBRE suggests that the recovery in other major markets across the region may be postponed until late 2024 or early 2025.
Henry Chin, CBRE’s Global Head of Investor Thought Leadership and Head of Research notes that demand for hotel and multifamily assets remains strong among investors, particularly for prime properties in key locations across all asset types.
According to a separate study by Colliers, cap rates in most Asian markets remained stable, with Australia and New Zealand driving regional movements. Both countries saw an increase in cap rates during the first quarter of 2024, especially in the office and industrial sectors.
However, Colliers also observed subdued office transaction activity in Australia during the first quarter, following a 72% drop in transaction volumes last year. This decline in sales is seen as an indicator of a softening in office cap rates within the country.
Greg Hyland, CBRE’s Head of Capital Markets for Asia Pacific, advises investors to focus on acquisition opportunities in the second half of 2024, particularly targeting prime investments. He suggests that buyers should aim to capitalize on price discounts before anticipated rate cuts take effect.
CBRE attributes the muted investment activity in the APAC region to investors’ cautious stance in light of the delayed interest rate cuts. As a result, capitalization rates in the region have seen some growth, while overall real estate investment volumes remain relatively subdued.