CBRE recently announced their 2018 Asia Pacific Real Estate Market Outlook and have concluded that "despite slower macroeconomic growth and steady demand for real estate, the regional business landscape is set to undergo significant change in 2018. Technological innovation will challenge the status quo; new companies and industries will emerge; end-users will be more vocal and opinionated; and the era of yield compression will end." 

The report summarises the key regions and sectors as follows:

Economy - 
The global outlook for 2018 is upbeat although Asia Pacific is set to feel the impact of the China slowdown. Business sentiment will remain positive but employment growth will continue to be constrained by the labour shortage. Low inflation has reduced pressure for major
interest rate hikes and exchange rate volatility is expected to subside. Geopolitical tension on the Korean peninsula; quicker-than-expected interest rate hikes in the U.S.; and the possibility of a faster downturn in China top the list of major risks.

Office - 
Office leasing demand will remain stable in 2018, with activity expected to be driven by tech and domestic financial firms. Asian corporates will dominate as new industries and sources of demand continue to emerge. Oversupply pressure will persist, led by China and India.
Regional rental growth is forecast to slow but Singapore and selected Australian markets are set to outperform. The workplace will take on greater importance as the war for talent intensifies. Occupiers’ desire for greater agility will result in the adoption of a mix of traditional, core and flexible solutions. 

Retail - 
Retail sales are forecast to remain solid and e-commerce growth will continue. Rental growth is expected to remain stable, driven by the improved performance of high quality properties. More retailers will adopt an omni-channel strategy and make greater use of technology in their stores and to inform business decisions. The role of bricks-and-mortar shops will change and more use will be made of alternative formats such as pop-ups. Among landlords there will be a stronger focus on retailtainment and securing highimpact tenants capable of increasing footfall and generating publicity.

Logistics -
The continued expansion of the e-commerce industry will drive solid demand for logistics space this year. Growing consumer demand for shorter delivery times is expected to create stronger requirements for urban logistics space. Rental growth is set to increase as supply
pressure remains modest. Landlords will need to enhance their portfolios to prepare for the adoption of automated storage and retrieval systems and logistics robots. 

Capital Markets - 
Investment demand will remain robust although transaction volume is likely to decline following the completion of numerous major deals in 2017. Purchasing activity will be led by funds and institutional investors. With the era of riding on yield compression to achieve capital returns approaching an end, income growth will become the major driver of capital value appreciation. Investors are advised to identify markets in the upward rental cycle or assets with potential rental reversion. There will be a stronger focus on asset management as a means by which to increase rental income. It will therefore be essential for landlords and investors to understand current occupier trends. 

Overall CBRE believe that business sentiment will remain positive, supported by the upbeat global economy.

For more information or to discuss the report email Henry Chin, Ph.D. Head of Research Asia Pacific CBRE via the contact details below. 

Source: CBRE

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