• Asia-Pacific real estate market remains resilient in 2024 despite macro headwinds

    5 December 2023

    Knight Frank’s New Horizon Outlook 2024 report, which provides key predictions for the commercial, residential, and capital markets, including emerging trends, opportunities, and challenges. 

    Christine Li, Head of Research, Asia-Pacific, Knight Frank and report author, says, “The logistics development pipeline, which has remained limited, is now growing rapidly, with an influx of new supply expected in 2024. This influx will alleviate the region’s tight supply conditions, particularly in the Chinese mainland markets such as Beijing and Shanghai, where over 17 million square metres of new supply are in the forecast. The region’s expanding options of logistics real estate continue to offer expansion prospects for businesses and investment opportunities for those seeking to capitalise on the region’s long-term growth dynamics.” 

    Martin Wong, Director, Head of Research & Consultancy, Greater China, says, “The overall economy and market performance in Greater China have not been growing as expected after reopening, which has dampened the investment demand for real estate, especially in commercial properties. However, the market demand for residential properties remains relatively solid. In Hong Kong, investors have allocated resources to repurpose assets, such as converting hotels into long-term rental apartments, co-living spaces, or student accommodations. The “Compete for Talents” scheme launched by the Hong Kong government has generated more demand for housing. It is expected that the leasing market in the entire residential sector will maintain steady growth in the next 6-9 months.” 

    Forecasts reaffirm the region as the fastest growing in 2024 

    For the broader economy, growth across over two-thirds of the region’s major economies is expected to remain stable or to accelerate in 2024. 

    Kevin Coppel, Managing Director of Asia-Pacific, says, “With favourable demographics, improvements in infrastructure, on-going investments in technology and its status as an economic powerhouse, the Asia-Pacific region offers immense potential across various geographies and asset classes. The dynamism of the Asia-Pacific real estate market, coupled with these powerful structural tailwinds, makes this an opportune moment to embrace its potential.” 

    A spotlight on megatrends that power real estate fundamentals 

    • Megatrend 1: Continued urbanisation
    • Megatrend 2: The highest concentration of the urban population
    • Megatrend 3: More than half of Asia-Pacific will be middle-class by 2024
    • Megatrend 4: Largest working-age population 

    SECTOR OUTLOOK 

    Residential

    • The region is expected to return to mid-single-digit growth in 2024 as sentiments recover, and investor confidence is restored.
    • The slower-than-expected Chinese economic recovery has dampened market sentiment in the Chinese mainland and Hong Kong SAR. These markets have a mixed outlook but with potential value-buy opportunities.
    • The property market in South-East Asia is expected to remain stable in 2024. Manila is the most robust residential market, projecting a 5.9% growth in 2024. In Singapore, investors remain on the sidelines after prices reached historic highs amid a subdued economic outlook.
    • The bright spots emerged in Australia, New Zealand, and India. In Australia and New Zealand, immigration and limited supply have helped to reverse the sentiments arising from higher mortgage rates. Mumbai is expected to see a 5.5% increase in prime residential prices in 2024, driven by high demand and strong economic growth. 

    Capital Markets

    • Private capital remains a driving force in the Asia-Pacific commercial real estate.
    • Amidst times of crisis, opportunities persist, enabling investors to access favorable assets that offer capital appreciation and positive rental reversions. Thematic sectors such as living spaces, life sciences, and data centers present promising prospects.
    • With substantial deals in the pipeline, the total Asia-Pacific multi-family investment volume for the year is set to surpass the previous high in 2020, with domestic activities dominating the scene.
    • Chinese mainland to be up and coming living sectors market. Although the sector is still in its formative stage, it holds significant growth opportunities owing to its vast population of 1.4 billion and the challenges that families and young professionals face when purchasing apartments. 

    Office

    • Emphasis on newer and ESG-certified buildings.
    • Most occupiers in Asia-Pacific have adopted an ‘office-first hybrid’ strategy. In view of this new workplace equilibrium, the demand-supply dynamic in Asia-Pacific is in the best position to support occupiers.
    • Overall, the market conditions for the Asia-Pacific prime office sector will continue to favour tenants in 2024, with the vacancy rate to trend upwards to 14.4% – 18.3% from the current 13.9%.
    • While the trends of ‘flight-to-quality’ and ‘flight-to-green’ persist, the enthusiasm for expansion will be restrained. 

    Logistics

    • Occupier activity levels continue to be impacted by economic uncertainty, inflationary pressures, rising interest rates and normalising e-commerce. While economic headwinds have induced caution in logistics occupier markets, prime logistics spaces remained supported by resilient demand. There remains strong competition for industrial development land, particularly in strategic locations close to major cities.
    • Optimisation of the sector’s logistics footprint has driven demand for modern facilities. Preference for institutional-grade facilities in core areas and last-mile locations continued to fuel leasing activity in the region, while China+1 strategies also saw ongoing expansions by major manufacturers in SEA.
    • With the pandemic in the rearview, e-commerce demand growth has waned. However, online retail and the need for more distribution capacity are not the only sources of occupier demand growth. Against the region’s digitalisation drive and growing consumer class, there remain, ample drivers, for the industry.

    Download the report.

    Video

    Z8 Fury G5 | Z by HP


    The Living System | A Short Film by Seven Z Ambassadors | Z by HP

     
    Gallery

    no images were found