Market Outlook

CBRE’s 2024 Asia Pacific Real Estate Market Outlook Mid-Year Review examines the predictions we made at the beginning of 2024, and reveals our outlook for the rest of the year.

Our original forecasts from January were largely correct, although the prolonging of expected interest rate cuts has delayed a recovery in investment activity. CBRE has therefore slightly revised down its full-year investment volume forecast to an increase of 0% to 3%.

CBRE retains its forecasted full-year gross office leasing volume at 0 to 5% growth on the back of solid upgrade demand and flight to green relocation, while retail expansionary demand remains resilient, as expected. Conversely, logistics demand normalised faster than expected as occupiers retain a preference for renewals over relocations due to high rents and fit-out costs.

This report explores the key trends and forecasts that will shape Asia Pacific’s commercial real estate market for the rest of 2024 and beyond.

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Asian Real Estate Securities continue to oscillate in 2024 as rates expectations drive performance of REITs, Developers, and Asian currencies. One positive note is that globally fund managers are said to be the most underweight the real estate sector they have been since 2009, a year when entering the sector delivered several consecutive years of strong absolute and relative performance. Despite increases in yields and hawkish comments from Fed officials, the corrections have been shallow and on low volumes. MSCI changes which resulted in the deletion of several Asian REITs from their index had been an overhang and that was removed at month-end, enabling us to potentially see some improvements after well-flagged deletions led to underperformance as passive funds were sellers. We added to positions that were impacted as a result of these changes. Sentiment in the near term will likely be dictated by US employment data to be released at the end of the first week of June. Last month’s report showed an increase in the unemployment rate so any continuation of this trend may shift rate expectations yet again which would be positive for Asian REITs and currencies. Large discretionary consumer companies in the US have noted that lower-income consumers have been notably weaker, possibly as pandemic savings have been run down and higher costs crimp disposable income. Results and guidance behind us, the drivers for REITs and Developers are likely to be macro, but we could also start to see some uptick in corporate activity and buyback announcements.

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The real estate market in the Asia Pacific (APAC) region continues to exhibit robust growth on a global scale, despite the challenges posed by rising interest rates and housing crises in numerous countries. Significant technological progress in APAC economies has catalysed transformation within the real estate sector, with digitalisation and sustainability integration gaining momentum. These changes have also concurrently influenced the development of real estate projects within the region.

Globally, the real estate sector is increasingly embracing environment, social and governance (ESG)-driven innovations as a solution to issues such as escalating carbon emissions. This shift is evident in the updated real estate regulations within the APAC region for 4QFY24. Several APAC economies, including China, Hong Kong and Japan have implemented guidelines promoting green infrastructure and technology integration to confront this challenge.

Furthermore, commercial and industrial real estate is significantly rising in the APAC region despite constrained liquidity. In the housing segment, countries such as Australia, Singapore, China, India and Hong Kong have prioritised strategic reforms and regulations to address the housing demand. Notably, India and Singapore have initiated advancements within the retirement homes segment, catering to the needs of senior citizens seeking accommodation.

In spite of the prevailing challenges, APAC economies offer an attractive prospect for investors due to regulatory updates across various asset classes and types. These economies are predicted to play a pivotal role in channeling regional investments and fostering development in the forthcoming months.

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Southeast Asia foresees strong economic growth in 2024, with most major economies expected to accelerate despite challenges like inflation and geopolitical tensions. Easing inflation and increased investments are poised to further support growth.

Cushman & Wakefield's latest paper explores the promising growth prospects of Southeast Asia (SEA) in 2024. Forecasted to expand by 4.6%, SEA's economy is on an upward trajectory, outpacing the previous year's growth rate of 4.0%.

Singapore’s economic growth is set to improve to 3.0% in 2024, higher than 1.1% growth in 2023, albeit growth would be tempered by a still-high interest rates environment and global economic uncertainties.

Economic growth would be underpinned by a recovering manufacturing sector as external demand recovers and resilient demand for services given Singapore’s status as a regional business hub and tourism recovery. Overall property demand is expected to improve, albeit cautiously, and higher supply in some markets such as the residential and office market would crimp rental prospects.

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