Asia Pacific Office Market Moves To Price Discovery Mode
ASIA PACIFIC – Following a series of interest rate hikes and other macroeconomic issues that affected investment volumes of commercial properties, real estate experts revealed that sellers and buyers of office assets in the region have moved into “price discovery mode,” reported Mingtiandi on Tuesday evening (15 November, SGT).
This was stated by senior executives at Link REIT, Nuveen, Cushman & Wakefield (C&W), and Brookfield Asset Management during a panel discussion on core office strategies hosted by Mingtiandi.
Nuveen’s Chief Investment Officer Louise Kavanagh thinks that the slowdown in big-ticket office deals won’t last long.
“I think it is a momentary pause and we’re in a price discovery mode at the moment so everyone is just waiting to digest some of the downside risks and look at the recalibration in pricing.”
“So I think we will see momentum pick up again, perhaps in the next year as more allocation will need to be made to the region… There’s a lot of things that are feeding into this, but we are seeing pockets of hope in some of these markets.”
Link REIT’s CIO for strategic investment Kenny Lam concurs. He said multinational property investors are taking a “wait-and-see approach” as the gap between the sellers’ asking prices and buyers’ expectations has increased over the past few months.
Although figures from MSCI Real Assets revealed that office transactions in Asia Pacific fell by 45 percent year-on-year to US$14.9 billion in Q3 2022, Cushman & Wakefield’s Regional Director for Asia Pacific capital markets Gordon Marsden think that a broad-based recovery could happen in less than a year as US interest rates ease.
“I very much see this as a relatively short term pause in terms of activity,” said Marsden, adding that that the rebound in office transactions will likely occur in H2 2023 as he expects slower rate hikes by the US central bank in the next few months
In Asia Pacific, one of the strongest office markets is Singapore, where Nuveen partnered with JP Morgan Asset Management to purchase the One George Street office building for US$944 million in 2021.
With the office stock remaining tight in the city-state, Kavanagh shared that Nuveen was able to attain a positive rental reversion of 11 percent at its 23-storey property, with conditions paving the way for more revenue growth in the future.
“I think the Singapore office is one of the standout markets when we look across the region,” she said, adding that Nuveen is targeting an 18 percent growth in office rents across Asia Pacific in the next 5 years.