Offices Deemed As Defensive Assets That Will See Resilient Demand
ASIA PACIFIC – Knight Frank said that as property investors face volatility in the next few months, they will favour defensive assets that can hedge against inflation, like office space, reported The Edge on Friday morning (23 December, SGT).
“Commercial real estate which exhibits income growth potential, diversification benefits and relative stability will see strengthened interest,” stated the property consultancy in its forecast.
In Asia Pacific, offices are considered the biggest asset class. Real estate consultancies projected that office space will witness resilient demand despite economic issues that would impact office rental volumes and business expansion plans of would-be office tenants.
Henry Chin, the Research Head & Global Head of investor thought leadership at CBRE, noted that good-quality office buildings in central business districts (CBDs) in major high-growth cities will offer the most viable opportunities, supported by an ongoing flight to quality and a return to office by workers.
Additionally, the Urban Land Institute (ULI) thinks that returns will be more resilient in office markets that favour the landlord, such as in Seoul, Sydney, and Singapore.
In Asia Pacific, Singapore, Australia, South Korea, and Japan stand out as markets where investor demand and deal volumes are expected to remain strong. Based on a study by Colliers, these 4 countries are the leading choices of investors across different asset classes, indicating an “overwhelming” preference for established metropolises that are more likely to deliver value amidst a price correction.
Moreover, Singapore is the top city in terms of investment prospects, according to a ULI survey. The institute highlighted that the republic continues to benefit from a redirection of capital that would otherwise have been invested in China. In particular, office properties are forecasted to continue attracting interest, supported by solid rental growth forecasts, even though deal volume slowed in Q4 2022.
Another office market that is expected to remain resilient is Australia, which is supported by vibrant Sydney and Melbourne.