Thought Leadership

Explore the Q3 2023 report on India’s commercial office and residential sectors. Commercial leasing hits 16 MSF, while the residential market maintains robust sales, but affordable housing demand decreases.

• Residential demand in Q3 2023 trended up significantly to 82,612 units, 12% higher in YoY terms and 7% higher compared to the preceding quarter.
• It is particularly noteworthy considering that it also constitutes an almost six-year high in quarterly sales volumes. Sales traction was higher across all markets in YoY terms.
• Price levels have also grown in tandem with demand across all markets in YoY terms. Price levels in Hyderabad saw the most significant rise at 11% YoY as focus increasingly shifts toward the development of premium high-rise properties.

A fast-evolving landscape of geopolitical tension, elevated inflation, rising interest rates, and shifting policy developments presents both challenges and opportunities for investors navigating a wave of transformative change in international asset classes. In particular, as investment funds move to revise their strategies, the dynamic real estate (RE) markets of the Asia Pacific (APAC) are now drawing increasing attention, as managers seek to tap their historically strong track record for growth as well as their potential for portfolio diversification at a time of rising levels of market risk.

This report was originally published in https://www.capitaland.com/en/about-capitaland/newsroom/Perspectives/2023/Benefits-of-Diversity-APAC-Role-in-Investment-Portfolio-Growth.html

• Worries about artificial intelligence (AI) supplanting knowledge workers have created more pain for the office market.
• A broader view on the economic impact of AI should consider possible positive impacts.
• AI could boost worker productivity and economic demand — and thus demand for other types of commercial real estate.

CBRE’s 2023 Global Occupier Sentiment Surveys feature insights from more than 400 corporate real estate executives across multi-national and domestic companies around the world. Their insights on the future of work have identified five trends that will guide global organizations as they optimize their portfolios:

• People are using the office less frequently than they did prior to the pandemic, but attendance is continuing to rise.
• Globally, the office remains a core element of corporate culture.
• Focus on portfolio optimization means more than space downsizing.
• Occupiers trade quantity for better quality space.
• Occupiers seek more flexibility in lease terms and building services.

Survey results portend an increase in office attendance globally in the coming year, especially in markets where employee return has been lagging.

This report was originally published in https://www.cbre.com/insights/reports/2023-office-occupier-sentiment-survey-global-summary

Key findings

With new products like ChatGPT, AI’s potential to transform the global economy has captured the world’s imagination

• AI has enormous potential to reshape real estate, with near and long-term impacts ranging from the emergence of new markets and asset types to innovations in investment and revenue models.
• A rapidly expanding AI ecosystem and its supporting infrastructure will drive demand for real estate in different markets across the globe.
• PropTech adoption has laid a solid foundation for AI integration in real estate. Organizations will need to consider how they can harness AI strategically and ethically, piloting applications before scaling to deliver value.

Japan is the third most sought-after investment destination within APAC for Singapore-based investors, only trailing behind the Chinese Mainland and Australia.

Between 2013 and 2023, an estimated USD 16.2 billion has been injected into Japan’s commercial real estate (CRE) market. Significantly, 12% of this capital influx occurred in the first half of 2023, highlighting a pronounced surge in investor interest.

How have the Japanese government’s monetary policies impacted real estate investors?

The Japanese government’s monetary policies to stimulate domestic inflation have proven to be a significant advantage for real estate investors. This is particularly evident as the Japanese yen has recently touched multi-year lows compared to major global currencies. This trend has created a favorable environment for those in the real estate market.

Despite recent adjustments to its yield curve control targets, the yen’s depreciation against the Singapore dollar was unmistakably pronounced, hitting an unprecedented low in 2023. The added firepower has put Singapore as the top cross-border investor in Japanese real estate so far this year.

Following the lifting of pandemic control measures at the end of 2022, China’s consumer market has rebounded strongly. National total retail sales of consumer goods grew by 8.2% y-o-y in H1 2023, with the contribution rate of final consumption expenditure to economic growth reaching a record-high 77.2%. Domestic demand is now firmly established as the main engine of economic growth.

At the same time, the impact of COVID-19 on the consumption, lifestyles, and values ​​of domestic residents is accelerating the emergence of structural trends that will have a far-reaching impact on the retail sector in areas ranging from store strategy to sustainable development. These trends will also influence demand for retail properties and asset management.

This report by CBRE identifies the main trends characterising China’s retail property market in the post-pandemic era and provides recommendations for retail occupiers, investors and developers preparing to navigate what will be a critical period for the cyclical recovery of China’s retail market and normalisation of domestic consumption.

This report was originally published in https://www.cbre.com/insights/reports/retail-in-the-post-pandemic-era-trends-and-opportunities

Retail leasing demand in the world’s leading retail markets continues to rebound as economic activity recovers in the wake of the COVID-19 pandemic. The Tokyo retail market is no exception, with a resurgence in retailer demand having commenced in H2 2022.

In addition to existing retailers looking to increase their store numbers, several overseas brands have made their first ventures into the Japanese market. As was the case prior to the pandemic, Tokyo continues to be a preferred location for retailers seeking to establish or extend their store presence.

This report compares Tokyo with several of the world’s other major retail markets including New York, London, Paris, Milan, Shanghai, Hong Kong, and Singapore and explores the following factors that make Tokyo, and Japan as a whole, an attractive location for retailers to establish stores.

Tokyo: Rents are reasonable when compared to city GDP
Japan: E-commerce ratio as a percentage of total retail sales is low
Japan: Inbound tourist numbers and tourist consumption have demonstrated considerable scope for growth

This report was originally published in https://www.cbre.com/insights/viewpoints/tokyo-the-city-of-choice-for-retailers

Asia Pacific is continuing to witness aggressive expansion across primary and secondary data centre markets with 9.7GW operational, 3.3GW under construction and 8.5GW in planned stages across the region.

The usual primary markets, Beijing, Hong Kong, Mumbai, Seoul, Shanghai, Sydney and Tokyo, continue to experience growth despite headwinds originating from a lack of land parcels and power availability. As a result, ancillary locations are being evaluated as part of expansion strategies. The moratorium’s cap on Singapore’s IT capacity has led to unmet demand in the market, which has spilt over into nearshore markets such as Johor, which is seeing a huge pipeline under development and commitments to land banks. Similarly, Greater Jakarta’s large pipeline is driven by its central geographic location in South-East Asia and the country’s immense population growth has sustained its appeal to major investors and operators.

Global cloud service providers (CSP) continue to show a marked interest in secondary markets across the region. Hyperscale CSPs have planned presence in the secondary markets of Auckland, Bangkok, Busan, Kuala Lumpur, Osaka, Pune and Taipei.  The tendency for colocation operators, developers and investors to follow CSPs into new frontiers with their own data centre deployments will see secondary markets attract new players and witness rapid growth over the next few years.

The Asia Pacific data centre region is experiencing varying speeds of development and so, for the first time, we have introduced our Asia Pacific Data Centre Markets Maturity Index, to track the evolution of a number of notable markets each quarter. This report will delve into 12 notable markets: Tokyo, Mumbai, Sydney, Singapore, Seoul, Johor, Jakarta, Hong Kong, Manila, Bangkok, Auckland, and Ho Chi Minh City.

Institutional investors have continued to pose faith in the Indian real estate sector despite the global headwinds, including uncertainty over economic growth and geopolitical tensions. The rise in investment inflow is an indication of the growth opportunities as India continues to emerge as a bright spot among international markets.

The country’s property sector has attracted over USD 2.9 bn/USD 2,939 mn worth of investments across 22 deals during H1 2023. The average deal size of investments increased by 17% to USD134 mn compared to USD115 mn, an aggregate of 2022, according to JLL. The investment pattern continues to be robust and is expected to cross USD 5 bn in CY 2023, which has been the annual trend pre-covid and in 2022.

Key highlights of the report:

• H1 2023 witnessed significant increase in domestic capital to 44% share of the total investment compared to 18% in 2022
• Office sector remained the most favoured sector with a major share of 66%
• Residential sector attracted investments of USD 512 mn across nine deals in H1 2023
• Warehousing attracted investment of USD 366 mn i.e.,80% higher than H1 2022
• USD 2,792 mn of platform commitment announced across 4 deals in H1 2023 to be invested in the next few years
• Successful listing of India’s first retail REITs with 81% anchor contribution by major domestic insurance companies, mutual funds, and pension schemes