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Investors cautious in 2023 and investment volumes could fall 5-10%: JLL

/ EdgeProp Singapore |

December 20, 2022 1:32 PM SGT

Japan will remain the top destination for investors due the attractiveness of the Yen, coupled with the country’s relatively low interest rate environment.

SINGAPORE (EDGEPROP) - According to JLL, real estate investment volumes in the Asia Pacific could fall 5 – 10% in 2023. This would continue the moderation recorded in 2022 which is expected to record a full year decline of 25% y-o-y, the consultancy says.

“Optimism driven by the idea of the pandemic coming to an end has slowly given way to caution amid concerns about inflation, interest rates and geopolitics. While the Asia Pacific region is likely to fare better due to more resilient domestic demand, it will not be left unscathed from the broader challenges,” says Roddy Allan, chief research officer, Asia Pacific, JLL.

He adds that this will put more pressure on policymakers to balance support measures as economic uncertainty persists next year.

However, one sector that is expected to buck the trend are capital flows to the hotel real estate sector. JLL anticipates that these hospitality assets could see a 6% y-o-y increase in investment for the whole of 2023. This would extend the 10-15% y-o-y increase this year.

The hotel sector largely benefitted from a rebound in international travel this year.

Despite headwinds, JLL says that investors will target real estate sectors that benefit from structural tailwinds and higher potential returns. These sectors include data centres, logistics assets, and multifamily residential properties.

Office space upgraders will continue to push up the demand for high-quality, premium commercial assets. This means that high-quality office space will significantly outperform the rest of the office market in key gateway cities in the region.

On the other hand, e-commerce-related demand is propping up demand for quality logistics and industrial assets. Demand from e-commerce is expected to be a long-term driver for warehouse space, especially in countries where the growth journey has a long runway.

Developers are already responding to this demand and 279 million sq ft of new stock is expected to come on stream in 2023, says JLL.

The consultancy expects that Japan will remain the most attractive investment destination for most investors in 2023. This is due to the attractiveness of the Yen, coupled with the country’s relatively low interest rate environment.

Meanwhile, Singapore’s status as a “safe haven and sound property fundamentals” will continue to attract capital, while Australia’s “highly transparent framework and low beta characteristics to draw core investors,” says JLL.

“The 2023 outlook for Asia Pacific’s real estate markets is clouded as uncertainty persists. While the near-term outlook for real estate appears challenging, it also presents many opportunities,” says Allan. He says that economic disruption next year may prove “relatively short and shallow”, thus he urges investors to take advantage of future opportunities.

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