MARKETS
CRITICAL
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What does Trump 2.0 mean for APAC CRE?
What is the outlook direction for interest rates?
HAS ASSET PRICING STABILISED?
HOW MUCH CAPITAL IS AVAILABLE?
WILL investment volumes improve in 2025?
CAPITAL
QUESTIONS FOR
What DOES TRUMP 2.0 MEAN FOR APAC CRE?
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We are still in a period of uncertainty around the details and impacts of Trump’s policies both domestically and overseas.
Central banks will also need to balance their interest rate cutting cycle against the slowing pace of the U.S. Federal Reserve.
Tariffs are clearly at the front of concerns given the strong trade ties between the U.S. and APAC. At the same time, the value of intraregional trade in APAC has risen 45% to over USD4.0tn since the first Trump administration. Notwithstanding the U.S. remains an important export market for the region.
45%
cutting cycle
trump's policies
WHAT TO WATCH:
The breadth and scale of tariffs remains fluid, as is the path of U.S. monetary policy. Focus on what policymakers do, rather than what they say.
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TARIFFS
INFLATION
INTEREST RATES
FX RATES
GEOPOLITICS
WHAT IS THE OUTLOOK DIRECTION FOR INTEREST RATES?
Despite increased macro-economic uncertainty, central banks across most of the region are still leaning towards a more accommodative monetary stance.
For the most part, inflation was later to arrive in Asia Pacific, which saw central banks hike rates later and subsequently are lagging in the rate cutting cycle.
Most central banks in APAC have cut rates by around 50bps from their peak, compared to 100bps in the U.S. and 160bps in Europe. Japan is a key exception, where rates are increasing as part of normalising monetary policy, though the BOJ continues to progress cautiously.
50bps
MACRO ECONoMIC
CUTTING CYCLE
Expect ongoing volatility in the bond market, but the trajectory for interest rates remains downward. Keep focus on central bank messaging and forward guidance.
has asset pricing stabilised?
Expect markets to enter a period of pricing stability. Outperformance will come from careful asset selection matched with innovative strategies to secure and grow NOI.
Interest hikes, structural change and growth normalisation have all played varying roles in driving a softening of commercial real estate values.
More positively, aggregate measures of pricing from a range of sources all indicate that the majority of repricing is now over.
However, sector, asset quality, building location and tenant covenant have made assessments of asset value highly granular and nuanced.
INTEREST HIKES
REPRICING IS NOW OVER
ASSET VALUE
what is the outlook direction for interest rates?
how much capital is available?
Fund raising has been slowing since its peak. In 2021 over 200 funds closed, having raised a combined USD51bn. By 2024, this number had fallen to 96 funds and USD11.6bn.
Significant reserves of dry powder capital, built up from previous years, were deployed through 2024. Declining fund raising activity over the past 2 years means that dry powder capital at the start of 2025 has halved from a year ago.
As interest rates continue to fall, supporting the investment thesis into CRE, we expect fund raising activity to regain momentum.
Expect the return of institutional investors as core asset strategies come back into play.
DRY POWDER CAPITAL
96 FUNDS AND USD11.6BN
will investment volumes improve in 2025?
L&I and Alternatives will continue to lead the recovery in investment volumes thanks to their defensive and growth qualities.
The office sector remains the most traded in the region and has the highest asset allocation. Expect ongoing recovery in office investment as fundamentals improve.
Yes, the region reached bottom (in rolling annual investment terms) in H1 2024 at ~USD145bn, since then volumes have modestly increased, ending 2024 at ~USD195bn (including AirTrunk).
While through-the-cycle sectors have gained investor interest in recent years, all sectors have moved off their nadir.
INVESTMENT VOLUME RECOVERY
USD195BN
