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CBRE’s 2022-23 Global Fit-Out Cost Guide is the industry’s most comprehensive analysis of fit-out pricing globally. This year’s edition focuses on the global changes in work models and the challenges faced as a result of the pandemic, climate change and heightened economic uncertainty.

The global shift in workplace behaviors has resulted in new ways of thinking about the construction of offices. Companies have adopted hybrid work models, and people need a blend of flexible, team and event spaces. Likewise, many companies have set net-zero carbon targets, expanding real estate sustainability strategy beyond energy savings to include decarbonization and Environmental, Social and Governance (ESG) criteria.

But with the changes there have been challenges. The lingering effects of COVID-19 and the war in Ukraine have led to economic and supply chain uncertainty, which affects the fit-out market by diminishing budgets amid inflation and causing long lead times in procurement.

CBRE introduced our Fit-Out Cost Guide in 2013 as a benchmarking tool to support planning and investing in capital fit-out projects. This year our cost guide leverages more quality data than ever before, with input from strategic partners.

The 2022-23 guide provides insight into global market trends, with regional data from APAC, EMEA, North America and Latin America.

This report was originally published in https://www.cbre.com/insights/books/global-office-fit-out-cost-guide-2022-2023

Although there were an estimated 150 million people living in rented accommodation in China in 2020, the country’s penetration rate of multifamily rental apartments remained very low, standing at under 2%. However, the evolution of China’s demographic structure; shift in housing consumption demand; and comprehensive government policy support are expected to drive an increase in the number of multifamily rental apartments to more than 12 million units by 2030.

CBRE believes that the sector’s strong leasing fundamentals and potential for asset liquidity and scalability will ensure multifamily emerges as one of the most attractive commercial real estate investment asset classes in China in the next ten years.

With around three-quarters of China’s target multifamily users located in Guangdong, Shanghai, Beijing, Zhejiang and Jiangsu, investors are recommended to target these core markets in the country’s three major coastal city clusters. Site selection should also consider accessibility to public transportation and commute time to workplaces. The main investment approaches to multifamily rental apartments in China include acquisition and renovation of existing assets, greenfield development, and platform collaboration.

Affordable housing possesses both policy and market-oriented characteristics. Exit channels provided by C-REITs; regulatory approval for the conversion of non-residential housing into rental housing; and favourable taxation and credit policies will provide the sector with unique investment advantages.

On the operational side, CBRE recommends investors increase their investment returns through active management measures such as bulk procurement, digitalised leasing and operations systems, floor plan reconfiguration and value-added services.

This report was originally published in https://www.cbre.com/insights/reports/investing-in-china-multifamily-real-estate

On December 7, 2022, the Chinese government announced a 10-point plan signalling a shift away from its zero-tolerance COVID-19 policy. The measures were announced as China’s short term economic indicators continued to weaken, with local governments in particular coming under acute financial strain.

Retail and tourism are set to be the main beneficiaries of the policy easing. Given the performance of other Asia Pacific markets since their relaxation of pandemic-related policies, CBRE expects retailer expansion to pick up as early as Q2 2023, supported by rising demand for prime retail space and the bottoming out of shopping mall rents as infections gradually subside and the population adjusts to a living with COVID-19 policy.

With regard to the office market, the easing of pandemic restrictions will bring about an increase in site inspections. A rebound in office demand is likely to follow in another three to six months as occupiers’ business outlook brightens along with the economic recovery.

Improving economic fundamentals should boost commercial real estate investment volume in 2023, which will continue to be driven by domestic institutions. With the Five-Year Loan Prime Rate (LPR) standing at an historically low 4.3%, cheaper lending costs will strengthen China’s relative appeal to cross-border investors.

CBRE recommends long term core investors focus on built-to-rent multifamily, business parks and industrial parks around tier I cities, along with trophy office assets in Shanghai and Beijing. Opportunistic investors are advised to target distressed assets. Mainland China’s re-opening will eventually benefit the retail and hotel sectors in Hong Kong SAR, Japan and Thailand, as well as the student living and residential sectors in Australia.

This report was originally published in https://www.cbre.com.cn/en/insights/briefs/China-Brief–China%E2%80%99s-shift-from-zero-covid-to-reopening-seen-as-hugely-beneficial-to-real-estate

• Tenant enquiries and site visits increased in the surveyed period, largely driven by the retail and industrial sector. Activity in mainland China continued to be constrained by strict pandemic-related measures.
• Demand for both traditional and flex office space cooled as many occupiers switched to wait-and-see mode amidst the dimmer economic outlook. The appetite from industrial sector also decreased as respondents saw more consolidations.
• While the outlook for rents in Korea, Singapore and Australia turns more positive in the surveyed period, lagging markets like mainland China also expected a slower rental decline.
• Regional leasing sentiment remained largely stable. Although mainland China was the weakest performer, a more positive outlook is expected along with recent relaxation of zero COVID policy. Landlord strength continued to decline as the market shifted further in favour of tenants.

This report was originally published in https://www.cbre.com/insights/briefs/asia-pacific-market-sentiment-survey-december-2022

In the first survey of its kind, CBRE polled more than 20,000 people worldwide – from Gen Z to Baby Boomers – earlier this year to understand how they will live, work and shop in the future, and how this will impact the real estate they use. Included in the survey were around 9,000 respondents from Asia Pacific.

The survey findings revealed fresh insights that can be harnessed to inform real estate occupier and investor strategies, and ensure that real estate is positioned to meet users’ evolving needs.

Key Asia Pacific findings include:

LIVE

• Strong desire to move: 32% want to move their home, with city centre areas most popular
• Robust homebuying sentiment: 66% of those planning to move homes want to buy instead of rent
• Shifting preferences for home selection: 66% say health and safety is a more important factor than price                  

WORK

• People want more flexibility: 85% currently spend at least three days per week working at the office
• Location is key: 75% are satisfied with their city centre offices; 55% who work in suburbs stated the same
• Workplace quality matters: 69% of office-based workers attach greater importance to workplace quality

SHOP

• Most consumers prefer to shop offline: 61% prefer to see products in-store before ordering online
• Outlook for personal finance is upbeat: 53% expect their financial situation to improve over the next year
• Ethical consumerism is growing: 80% are more aware of environmental & social issues when they shop

This report was originally published in https://www.cbre.com/insights/local-response/asia-pacific-live-work-shop-report-2022

KEY TAKE-AWAYS

• APAC countries continue to rank highly as locations of production, particularly due to the abundant supply of low cost of labour: of the top 12 locations, half are in APAC.
• Many of the countries that have slipped in the rankings compared with 2021 have done so due to increased costs (particularly for labour and electricity) and increased risk (economic, political and natural disaster); a number of these countries are in Europe where the war in Ukraine has had a significant impact on cost and risk factors.
• A wide range of countries have also experienced even greater constraints in the availability of labour as unemployment rates have continued to fall; this has affected countries across all geographic regions and states of economic development albeit key production locations in emerging APAC markets continue to benefit from expanding labour pools.
• A number of countries – particularly in Europe – have improved their ability to achieve sustainability targets, including efficient resources use and creating green economic opportunities, bolstering their longer term economic outlook and risk profile.
• U.S. companies are bringing jobs and supply chains home at a historic pace. American companies are on pace to reshore, or return to the U.S., nearly 350,000 jobs this year, according to a report published by the Reshoring Initiative.

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