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As in North America and Europe, a full recovery in commercial real estate investment activity has yet to be witnessed in Asia Pacific as expectations for the timing of interest rate cuts are continually pushed back and the rate of repricing has yet to match expectations. CBRE has therefore slightly revised down its full-year investment volume forecast to an increase of 0% to 3%. Reaching this target will be highly dependent on the level of purchasing activity in Japan in H2 2024, where cross-border interest has somewhat waned since H2 2023 as investors shift focus to asset types offering higher return profiles.
Mid-year review
Investment is expected to remain muted in H1 2024 due to limited yield expansion and high interest rates. With most markets continuing to experience negative carry, further re-pricing is anticipated across asset classes.
Forecast made in January 2024
Muted activity in H1 2024 amid lack of yield expansion
Forecast Accuracy
With yields set to continue to expand in H2 2024, there is still time for investors to capture cyclical investment opportunities. While investors continue to favour active markets, such as Japan and India, countries such as Australia and Korea have seen pricing approach the top of the cycle. Elsewhere, markets such as mainland China, Singapore and Hong Kong SAR are seeing a greater number of investors willing to soften cap rates to meet value change expectations in other markets globally.
Investors remain focused on industrial & logistics assets, despite its softening fundamentals, along with hospitality properties. CBRE sees current conditions in the Asian office market as being conducive for contrarian investment strategies in H2 2024, with domestic investors especially attracted to current performance indicators and discounted opportunities across the region.
Mid-year review
The second half of the year will see an uptick in real estate investment activity on the back of re-pricing and interest rate cuts. Demand will be led by high-net worth buyers, cash-rich investors and corporates seeking high quality assets. Japan will remain the most preferred market, while Australia and Korea will be the subject of stronger interest.
Forecast made in January 2024
Investment to pick up in H2 2024
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While value-add opportunities remain highly sought after, pricing for core assets is reaching a consensus peak in most markets, meaning that investors may shift focus back to core strategies in the second half of the year. Although still a smaller segment of the market in Asia Pacific compared to the Europe and the U.S., credit strategies continue to garner some attention.
Mid-year review
Investors will prioritise value-add opportunities for their high internal rate of return, while core assets in tier I markets will remain sought after due to their ability to provide stable cash flow. Private credit investment is poised to gain further popularity due to tight funding conditions.
Forecast made in January 2024
Focus on value-add, core and private credit
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