APAC Property Investment Slump to Continue in 2023 With Hotels to Outperform

Asia Pacific real estate investment volume is expected to fall by 5-10 percent in 2023, narrowing from an estimated decline of 25 percent in 2022, as tumultuous economic and financing conditions continue to weigh on sentiment, according to JLL.

Hotels are the one segment likely to buck the trend, with capital inflows forecast to rise by 6 percent in the year ahead, the property consultancy said Tuesday in a release. Such a showing would build on the 10-15 percent increase seen in 2022 as the hospitality sector benefited from borders reopening.

Roddy Allan, JLL’s chief research officer for Asia Pacific, said optimism driven by the idea of the COVID-19 pandemic’s end has slowly given way to caution amid concerns about inflation, interest rates and geopolitics.

“While the Asia Pacific region is likely to fare better due to more resilient domestic demand, it will not be left unscathed from the broader challenges,” Allan said. “As a result, there will be increased pressure on policymakers to delicately balance support measures as uncertainty persists.”

Safe Havens in Demand

Japan will emerge as the most attractive destination in 2023 as low interest rates and the yen’s weakness entice offshore investors, JLL said. Regional star Singapore will continue to attract capital based on sound property fundamentals and the city-state’s status as a safe haven, while Australia’s highly transparent framework and low volatility will draw core investors.

In its Asia Pacific Outlook 2023 report, JLL named multifamily as its favourite strategy in Japan, offices as its top investment pick in Singapore and logistics as the best choice for Australia.

“Despite a slackening in fundraising activity, JLL anticipates investors will look to sectors benefiting from structural tailwinds and higher potential returns — namely data centres, logistics, multifamily and in a slew of scheduled greenfield projects in emerging markets including India and Southeast Asia,” the agency said.

In terms of rent growth, JLL sees Seoul leading regional office markets in 2023 as tight vacancy, healthy demand and inflation pressures combine to push up rates by an expected 6.8 percent in the South Korean capital.

Sydney and Melbourne are tipped for the highest logistics/industrial rent growth at 12 and 8 percent, respectively, far ahead of next-best Singapore’s 4.5 percent, while Ho Chi Minh City’s retail rents are poised to surge 15.6 percent to lead the region, according to the report.

Emerging ESG Trends

JLL’s global Future of Work survey found that 74 percent of organisations would be willing to pay a premium for leasing a building with leading sustainability or green credentials, and 22 percent said they already have.

“With an acute shortage of green and efficient buildings, property owners who undertake retrofitting projects can benefit from higher rent, reduced financial risk, improved access to capital at favourable rates, and better prospects for attracting and retaining tenants,” the agency said.

While occupiers in Asia Pacific aspire to have sustainability certification for at least half of their portfolio by 2025, the current supply of green-certified buildings at 40 percent of Grade A office stock is insufficient to meet the net-zero targets set by occupiers, the survey noted.