Pricing, Interest Rates Top Concerns For Investors Eyeing Asia Commercial Properties
ASIA PACIFIC – A survey by Jones Lang LaSalle (JLL) showed that the factors largely impacting investment decisions on commercial properties in the region has shifted, reported RETalk Asia on Thursday morning (2 March, SGT).
Based on JLL’s Asia Pacific Investor Sentiment Barometer 2023, pricing uncertainty was identified as the largest challenge to capital deployment plans in Asia Pacific this year by 78 percent of respondents.
This was followed by uneven and unpredictable interest rate policies across the world, which was stated by 70 percent of the surveyed commercial property investors looking to deploy capital in the region.
In comparison, only 9 percent of the respondents identified competition for assets as their top challenge for capital deployment. Previously, this was the top concern in the early 2022 survey, with 82 percent of the respondents saying so back then.
JLL said that uncertainty on selling prices and interest rates would curtail overall commercial property investment in Asia Pacific this year. Nonetheless, longer-term optimism remains high, with respondents saying that central bank policies are prompting a pause rather than a retreat from investment activity.
Moreover, 58 percent of the polled commercial property investors think that benchmark rates will first need to fall by 50 to 100 basis points before investment activity recovers. Also, about 60 percent of the respondents expect overall commercial property investment to fall further from the low base of US$129 billion recorded in 2022. Comparatively, JLL foresees that investment volume would drop by 5 to 10 percent year-on-year in 2023.
“Investors are poised to adjust capital plans in 2023 as deployment challenges evolve to mirror the unpredictable global macroeconomic and central bank policy environment,” noted JLL’s Chief Research Officer for Asia Pacific, Roddy Allan.
“However, this period of expected caution is not indicative of the favourable longer-term faith investors have in the region, but it will force an adjustment in how, when and where they accelerate the deployment funds later in year,” he added.
Meanwhile, 64 percent of respondents revealed that they are looking at value-add strategies, such as investing to upgrade an office building’s green credentials, compared with 53 percent in the 2022 survey.
50 percent of the respondents identified themselves as real estate and/or private equity investment managers while others identified as commercial property investors with diversified portfolios. Their primary sources of capital are North America and Europe.