Asia-Pacific real estate investment volumes to drop 5-10% in 2023: JLL

REAL estate investment volumes will continue to contract by 5 to 10 per cent in 2023 after declining 25 per cent year on year. This forecast is due to “tumultuous” economic and financing conditions weighing on sentiment, said JLL on Tuesday (Dec 20).

“Optimism driven by the idea of the pandemic coming to an end has slowly given way to caution amid concerns about inflation, interest rates and geopolitics,” said JLL Asia-Pacific chief research officer Roddy Allan.

Certain segments, however, will continue to see investor interest. The real estate firm expects capital flows into hotels and hospitality assets to rise 6 per cent in 2023, tracking a 10 to 15 per cent increase in 2022 amid border reopenings.

Sectors which may benefit from structural tailwinds and higher potential returns include data centres, logistics, multi-family and greenfield projects in emerging markets such as India and South-east Asia.

JLL expects Japan to be the most attractive investment destination due to a weak yen and the country’s low interest rates. This is followed by Singapore – seen as a safe haven, and Australia, which has a highly transparent framework and low volatility.

When it comes to ESG (environmental, social and governance) trends, JLL also observed that nearly three out of four organisations would be willing to pay a premium for leasing buildings with green or sustainability credentials.

There are also opportunities in rental premiums for green-certified buildings due to a supply-demand gap. JLL noted that the current supply of green-certified buildings (40 per cent for Grade A office stock) is insufficient to meet the ambitious net-zero targets set by occupiers. Asia-Pacific property occupiers are aiming to have market-recognised sustainability certification for at least half of their portfolio by 2025.

Meanwhile, JLL expects e-commerce to continue supporting demand for warehouse space, especially in emerging Asia – which has a long runway for growth.