APAC real estate outlook positive in 2022, transaction volumes to hit record high: CBRE

ASIA-PACIFIC'S real estate market could hit a record high on the investment market front, with strong liquidity underpinning a projected 5 to 10 per cent year-on-year increase in transaction volumes, according to CBRE.

Logistics assets will remain keenly sought after while interest in offices is expected to strengthen this year. Demand for retail and hotel assets on the other hand may take longer to recover following the emergence of the Omicron variant and the reintroduction of tighter border controls and social-distancing regulations in many markets.

"CBRE observed several investors acquiring assets in these two sectors last year by forming joint ventures with operators to take advantage of price dislocation, a trend that will continue in 2022," said the consultancy, adding that it expects total investment volume to reach US$150 billion.

Overall, office yields are expected to hold firm in 2022 while selected cities such as Beijing, Shanghai, Sydney and Singapore may experience mild downward pressure on yields as rents either stabilise or enter the upward cycle.

Yields for retail assets will be stable overall but those for well-located malls and neighbourhood shopping centres are expected to compress, CBRE said.

"With the prime yield spread between three sectors having narrowed over the course of 2021, income growth will become an important driver of value," it said. "Active asset management and enhancement are set to take on a more prominent role in generating rental income."

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The consultancy also said a rebound in leasing demand in the coming year will bring an end to the downward rental cycle in the office and retail sectors, while the logistics sector is expected to enjoy another "strong year of growth".

The office sector, specifically, is expected to see net absorption increase by up to 10 per cent year on year in 2022. Demand is unlikely to reach pre-pandemic levels until 2023.

On the supply side, new Grade A office supply is expected to rise by 15 per cent year on year to nearly 67 million sq ft net floor area, the highest total in more than a decade.

With almost half of new supply located in mainland China, cities including Shanghai and Shenzhen will experience a supply peak in 2022, according to the report.

Most of the supply pressure will be in non-CBD areas, which account for 90 per cent of new space, ensuring occupancy in CBD locations remains resilient.

Meanwhile, India will account for 30 per cent of new regional supply. Most pre-committed space in this market is due to be delivered on schedule.

"CBRE expects 2022 to be characterised by faster decision-making, flight-to-quality relocation and workplace reconfiguration as companies gain confidence in the return to the office and the adoption of hybrid working," stated the report.

Overall, Grade A rents are expected to grow around 1 per cent in 2022.

On the retail front, international retailers will likely display a stronger appetite for expansion in Asia-Pacific this year. However, activity will be driven by brands with sound local market intelligence and established management teams, the consultancy noted.

"New-to-market brands will remain cautious in the absence of resumption of international business travel," it said.

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