As high interest rates and a global economic slowdown persist, the road to recovery may well prove to be a bumpy one in 2024. Nonetheless, Asia Pacific remains an attractive investment destination.
A look at the key trends shaping Asia Pacific real estate investment in 2024
A ‘HIGHER FOR LONGER’ INTEREST RATE ENVIRONMENT MADE INVESTORS WARY LAST YEAR
In 2023, a number of macroeconomic challenges emerged on a global and regional scale, ranging from the effects of a tightening interest rate cycle to the slowing Chinese economy and the repercussions of conflicts in Ukraine and the Middle East.
The Asia Pacific real estate investment markets were not immune and struggled as risk-averse sentiment affected all sectors and geographies. Total commercial real estate investment in Asia Pacific plummeted by 32.0% YoY to US$128.7 billion in 2023 but remained ahead of both European (-50.9% YoY) and American markets (-54.4% YoY).
China retained its position as the largest investment market in the region in 2023, overseeing deals totalling US$34.7 billion, a 24.7% YoY decrease. Investment activity was mainly propelled by well-funded long-term investors, domestic end-users, and insurance companies and the presence of distressed and refinancing-required properties, lead to a rapid price adjustment, even in tier-1 cities.
According to our research, Grade A office prices in the Core CBD market in Shanghai fell by over 10% YoY in 2023. This correction has been reflected in asking prices as Blackrock is currently looking to sell a pair of Shanghai office buildings in Putuo district at a 30% discount to their 2017 purchase price according to reports.