APAC to see full investment recovery in 2025; Singapore's market to parallel global narrative: Savills

/ EdgeProp Singapore |

November 29, 2024 3:28 PM SGT

Asia Pacific's (Apac's) real estate market continues to outperform its global peers, with real GDP growth exceeding that of the US and Europe, says Savills Research in its global outlook report for 2025, released on Nov 28.

"For the first time in five years, there is more stability, and perhaps more conviction, in the economic outlook," says Paul Tostevin, Savills head of world research. "This will put markets on a surer footing, boosting investment and activity."

In the first three quarters of 2024, Apac saw investment volumes grow 4% y-o-y to US$108.7 billion. The three markets that saw the most significant y-o-y growth in investment volumes over this period were Singapore (74% growth), South Korea (71%) and Australia (63%).

Savills Research forecasts global real estate investment turnover to rise 27% to US$952 billion in 2025. By 2026, global investment activity is expected to surpass the US$1 trillion mark for the first time since 2022.

Savills says global investments are expected to reach pre-pandemic levels by 2026, spurred by a stabilisation in interest rates and improved investor confidence.

Source: Savills Research using MSCI, RCA

"Singapore's real estate market is expected to parallel the global narrative," says Alan Cheong, executive director of research & consultancy, Savills Singapore.

Meanwhile, according to Savills, Apac is expected to stage "a full investment recovery" next year, driven by sectors such as tourism, living and industrial sector, specifically logistics and data centres.

"Preconditions exist for a recovery in real estate investment interest in Asia Pacific next year while longer-term structural trends should support values in growth markets including India and Southeast Asia," says Simon Smith, Savills regional head of research & consultancy, Apac. "How global themes play out across the region and who is best positioned to take advantage of them will ultimately determine winners and losers."

Savills adds that Apac's office sector remained attractive, commanding 37% of the total regional real estate investment for the first three quarters of 2024 – significantly higher than the global average of 23%.

Singapore, China, South Korea and Japan are the top cities in the region for office utilisation, with occupancy rates exceeding 90%. Apac also remains a stronghold for green-certified office spaces, with office occupiers placing more emphasis on environmental, social and governance (ESG) matters.

Source: Savills Research using MSCI RCA and Oxford Economics. Includes largest 16 global markets, accounting for over 90% of global investment

In Singapore, office tenants are increasingly adding more significant weightage to the green agenda. There has also been a slight recovery in activity levels, with more leases being concluded. CBD Grade-A space rental is likely to hold firm from 2025 through 2026.

Being a hub and gateway to the region, Singapore is a favourite destination for new overseas brands. Prime retail developments continue to see healthy demand, keeping rental levels firm.

In the industrial sector, notwithstanding cost pressures, demand remains strong in key sectors like logistics, advanced manufacturing, healthcare and data centres, which should help stabilise rental rates and capital values in the long term.

Greater AI adoption is leading to more data centres being built in Singapore, says Cheong. More data centre service providers are also using the city-state as a springboard to scour sites to build the infrastructure.

"As global investment and activity returns to more sustained growth, the [real estate] industry must adapt to evolving legislative landscapes and geopolitical dynamics while ensuring sustainable and socially responsible development to meet the needs of a changing world," Tostevin adds.