Thought Leadership

The rush of post-pandemic activity in the data center space seen throughout 2021 continued in 2022, despite headwinds in the overall economy and resource challenges in some of the largest markets worldwide. Hyperscale tenants continued their relentless expansion across regions, with specific interest toward secondary and emerging markets. Co-location providers and developers have followed suit, driven by higher availability and lower prices for both power and land.

The 2023 Global Data Center Market Comparison reviews all factors outlined in the previous edition of this report, with further commentary on a region-by-region basis. As with previous editions, we assess data center markets across the globe, within 13 different categories, to determine the top overall markets along with the top performers in each category. With this fourth edition of the report, we hope to provide members of the data center community with a better understanding of how the industry is rapidly changing and expanding across the globe.

Despite the challenges of juggling an economy under the weight of its zero-covid policies and stringent macroprudential measures, the Chinese government has remained steadfast in implementing its vision for the country’s REIT market. 2022 ticked off another milestone in the ongoing evolution, as China’s first batch of rental property REITs went public in August, deepening financing channels for the country’s real estate sector.

Strong regulatory backing, quality asset base and robust underlying demand for dividend-rich stocks from investors in China’s US$12 trillion stock markets will remain supportive of the sector’s strong valuations. Progress is palpable, and we can expect more C-REIT listings in 2023. The inclusion of conventional commercial real estate – arguably the proverbial holy grail and the final frontier in the evolution of C-REITs – is nearing reality and the wave of listings that follow will undoubtedly be a massive investment opportunity.

As many economies continue to raise interest rates to tackle inflation, and with growing concerns of a recession in other parts of the world, Asia Pacific investors have become more cautious, with net buying intention softening in 2023. 

CBRE’s 2023 Asia Pacific Investor Intentions Survey, which features insights from more than 500 investors across the region, finds that although fundraising activity remains healthy, most investors intend to adopt a wait-and-see stance in the first half of 2023 in anticipation of slower yield expansion and milder rate hikes.

Other key findings include:

• Real estate allocations among Asia-based institutional investors are largely below their global peers. These respondents indicate that their allocations to real estate will remain the same or increase over the next 12 months.
• Opportunistic strategies will gain momentum in 2023 as investors look to capitalise on price dislocation and seek distressed opportunities.
• Industrial and logistics remains the most preferred asset class, while residential (especially multifamily and built-to-rent) logged the strongest uptick in interest. Offices are still the top property type among core investors.
• Although healthcare-related properties have overtaken data centres to become the most popular alternative sector, the investible universe for this asset class in Asia Pacific remains limited.
• Tokyo retained its status as the top city for cross-border investment for a fourth consecutive year, followed by Singapore and Ho Chi Minh City.

This report was originally published in https://www.cbre.com/insights/reports/asia-pacific-investor-intentions-survey-2023

India has long been recognised as a country with immense potential, but it was often hindered by bureaucracy and red tape. In recent years, however, India has made laudable strides, with its economic growth leapfrogging other major countries, in part driven by concerted government-led reforms and sector-focused initiatives that have shaped a more business-friendly climate, particularly for foreign investment.

Today, India has forged ahead into a new era, and the country holds much promise with the largest youth population in the world1 and the second largest labour force2 globally. Investors can look forward to sustained returns from key beneficiaries of these structural advancements, particularly in the Office and Business Park sector.

This report was originally published in https://www.capitaland.com/en/about-capitaland/newsroom/inside/2023/January/Riding_the_Growth_Impetus_A_Focus_on_Indias_Office_and_Business_Park_Sector.html

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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