Property Investments In Asia Pacific

Property Investments In Asia Pacific To Grow 15-20% By 2021

ASIA PACIFIC – The region is expected to enter a new real estate cycle next year and property investments there is expected to increase by 15 to 20 percent, according to a recently published report by JLL.

“We expect [a] stronger appetite for assets with income stability as well as a pick-up in hotel, retail and office investments to occur in tandem with economic recovery and potentially more clarity on the relevance of the office,” said the property consultancy.

In comparison, investment volumes surged by 47 percent on an annual basis in Asia Pacific during 2010 as it recovered from the 2008 Global Financial Crisis.

Despite the continuing challenges faced by the office rental market, JLL believes that the office is here to stay, and the workforce is expected to remain as the main users of such premises. But due to the COVID-19 pandemic, office space will be de-densified from about 90 desks per 100 employees to 80 desks per 100 staff.

Moreover, the property consultancy thinks that 2021’s defining theme for the property market is the reimagining and reconfiguration of outmoded and outdated assets across all sectors to meet changing needs arising from e-commerce, health and safety, as well as remote working.

“JLL estimates that 40 percent of Asia Pacific office space is now in need of some form of refurbishment. Minor or major capital value improvements – depending on the asset – could represent US$400 billion in unrealised value for investors pursuing value-add strategies. As part of the upgrade of Asia Pacific’s office infrastructure, owners will invest CapEx to reduce OpEx.”

To attract tenants and buyers in the new property cycle in 2021, core office assets across Asia Pacific also need to be of higher quality. This is because a recent survey by JLL showed that 92 percent of major corporate occupiers plan to increase their allocation of higher quality office space when their lease expires, while 90 percent of all surveyed occupiers intend to slash the amount of lower quality office space they are renting.

The property consultancy also noted that while gross office leasing volumes fell 25 percent year-on-year during the first three quarters of the year, the drop slowed down during the first half.

“We expect to see the declines in leasing volumes improve into 2021, with leasing volumes broadly flat on 2020 levels,” said JLL. It added that office rents in Singapore is forecasted to increase by about 18 percent over the next 3 years, while capital values could register a higher growth of over 20 percent from 2021 to 2024.

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