Investors gear up to re-enter Asia Pacific’s commercial real estate market

As most countries in the region have started to ease lockdown restrictions 

A scenic view of the modern architecture in Phoenix Island, Sanya, China. DreamArchitect/Shutterstock

According to the latest Capital Market Viewpoint report by CBRE, commercial real estate investors have started to transition from rental abatement and asset management to prepare for a market re-entry in Asia Pacific, where most countries have already eased lockdown restrictions.

Since the pandemic has changed the real estate landscape and altered market fundamentals, the report advised investors to come up with a completely different strategy.

CBRE also discovered that most investors are now looking for high-quality assets and core investments that would produce stable and reliable cash flows.

Moreover, participants from their latest Asia-Pacific Cap Rate Flash survey said that they foresee investment inquiries to normalise in three to six months, which means the volume of transactions should gradually increase in the coming quarters.

More: Hong Kong’s commercial property market in turmoil

“Although investors will tread cautiously and investment volume is unlikely to return to pre-pandemic levels until mid-2021, there is still ample liquidity in the market, led by Asia-Pacific-focused closed-ended private equity real estate funds, insurance companies, pension funds and high-net-worth investors,” said CBRE.

The firm predicts institutional buyers to consider secondary trading opportunities for closed-ended funds as valuations are updated and rates become more appealing.

“While a mismatch in pricing expectations may inhibit some deals, we expect to see an increase in willing sellers in 2H20 (the second half of 2020), driven by liquidity needs, fund expiration and redemption pressure.”

“With the pandemic expected to have an enduring impact on working and purchasing behaviour – leading to increased prominence of specific asset classes – investors will need to be particularly mindful of how occupiers will use space in the future and how this will impact demand,” concluded CBRE.