Knight Frank Upbeat On Asia-Pacific, Says Many Risks "Priced In"

Editorial Staff

2 December 2022

The Asia-Pacific region is set to remain the world's fastest-growing region, despite headwinds caused by the Russia-Ukraine conflict and global financial volatility, a report by Knight Frank, the real estate consultants, said yesterday.

The firm’s report predicts that the market conditions in 2023 will continue to favour tenants as highly-amenitised office buildings with sustainable credits are being completed and ready for occupancy. Rents in the logistics sector are forecast to increase by 5.5 per cent, while office rents will rise by 2 per cent across the region.

The predictions come in the Asia-Pacific Outlook Report 2023: Pivoting Towards Opportunities.

"With much of the known risks largely priced in and likely to have overshot on current negativity, there remains scope for fundamentals to surprise on the upside, underpinned by the marginal easing of zero-Covid strategy and the lower-than-expected terminal interest rates,” Christine Li, head of research, Asia-Pacific, said.

“As of late, Chinese authorities have lowered the duration of quarantine for inbound travellers, a step in the right direction that could set the tone for more calibration and an eventual exit in 2023/2024. We can afford to be sanguine given that nascent signs of inflation peaking have crept into the Fed's data watch," Li said.

Kevin Coppel, managing director, Asia-Pacific added: “While the Asia-Pacific economy will face significant headwinds in 2023, it will remain a bright spot amid the shadows cast by the slowing global economy. Economies in the region will once again dominate growth worldwide, which will have implications for its real estate markets. That underlying growth will continue to underpin its attraction to occupiers, while its economic diversity offers ample opportunities for investors to target a range of asset classes to position their portfolios for the post-pandemic landscape.”

The APAC commercial property market, meanwhile, has been through a tough period. According to MSCI Real Assets, part of index and market data group MSCI, inflationary pressures and a spike in borrowing costs bore down on deal-making in the third quarter of the year. Investment volume totalled $32.6 billion in Q3, slumping by 38 per cent on a year before. The drop followed a 16 per cent year-over-year decline in the second quarter. Trades across all the major property types fell and few country markets escaped the fall.