Real estate sector in Asia-Pacific to remain ‘resilient’: ULI

ASIA-PACIFIC’S real estate sector is expected to remain “resilient” over the next few years, with largely stable capitalisation rates, said the Urban Land Institute (ULI) on Jun 8.

Of the regional markets surveyed, Singapore came out tops in the logistics segment, with the highest estimated capitalisation rate of 6.4 per cent this year. This is expected to dip marginally to 6.3 per cent in 2024.

Hong Kong meanwhile is expected see an estimated capitalisation rate of 3.55 per cent this year, falling to 3.4 per cent in 2024.

Shanghai is the only market of the 6 surveyed that is expected to see a projected rise, from 5.0 per cent in 2022 to 5.1 per cent in 2024.

The rates for Tokyo (3.20 per cent), Seoul (3.8 per cent) and Sydney (3.4 per cent) are expected to remain stable between 2022 and 2024.

The semi-annual ULI Real Estate Economic Forecast takes a deep dive into the forecast for key economic and real estate data points for Hong Kong, Singapore, Shanghai, Tokyo, Seoul and Sydney, as well as additional indicators for China, Japan, South Korea and Australia.

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Its findings are based on a forecast survey from economists and analysts at 10 real estate organisations.

On the office front, Tokyo is expected to witness a capitalisation rate of 2.60 per cent this year, the lowest in the region. The rate will likely to dip to just 2.30 per cent by 2024, reflecting continued robust demand for office assets domestically, said ULI.

Conversely, Shanghai’s and Sydney’s office sectors are expected to witness 4.53 per cent and 4.40 per cent of office capitalisation rates respectively this year. The rates will likely peak at 4.60 per cent and 4.50 per cent 2 years later.

Singapore’s office capitalisation rate is expected to remain stable between 2022 and 2024, at 3.20 per cent.

Separately, Seoul’s and Sydney’s retail sectors are expected to slightly improve between 2022 and 2024 with retail capitalisation rates compressing from 4.3 per cent to 4.20 per cent and 4.38 per cent to 4.33 per cent in 2024.

Impacted by mobility restrictions, Shanghai’s retail capitalisation rate is expected to peak in 2023 at 4.88 per cent, the highest in 5 years.

David Faulkner, president of ULI Asia-Pacific, said: “We believe Asia-Pacific will continue to be on an upward trajectory between this year and 2024, pointing towards a sustainable recovery following the pandemic.

“Even so, short-term tailwinds remain, as inflation rates in the region’s largest economies are projected to accelerate rapidly. Against this backdrop, we are expecting the real estate sector to remain resilient in the next few years, with largely stable capitalisation rates across the office, logistics and retail segments.”

Of the countries surveyed, ULI said it expects Australia to lead the pack with the strongest economic growth. Japan is also expected to enjoy an “upbeat economic outlook” in 2022, with faster growth rates compared to Hong Kong, China, Singapore and South Korea.