Rising investment activity expected across APAC in 2024 - Investment activity is forecast to increase steadily across the Asia Pacific region in 2024 , according to Colliers’ (NASDAQ and TSX: CIGI) 2024 definitely looks more positive than 2023, with a lot of pent-up equity which is looking to find a home,” Chris Pilgrim, Colliers Managing Director of Global Capital Markets, Asia Pacific. 

We expect APAC’s commercial property market will continue to uphold its strong position on the global stage over 2024 and contribute to a growing share of global investment activity.”

On a sector basis, industrial and logistics (I&L) has overtaken office as the asset class of choice for investors in the region, with 25% of investors naming I&L their preferred sector vs. 23% for office, followed by multifamily/BTR (14%), retail (11%) and hotels (11%).

Colliers Australia CEO Malcom Tyson, comments on the Australian market below:

• Throughout 2023 it was apparent that higher returns favoured the agile, as opposed to those who advocated a return to normal was inevitable. As investors diversified portfolios and increased allocation for alternative assets such as BTR, student accommodation and health sciences, successful landlords across traditional sectors such as office, industrial and retail embraced the flight to quality.  
• As uncertainty remains regarding the trajectory of interest rates and economic fluctuations over 2024, well-informed investors will reap coveted asset acquisitions when the pricing gap between vendors and purchasers closes, which will occur at different speeds for the office, industrial and retail markets.
• Since almost 60% of APAC investors expect regional economic growth to contribute positively to the real estate environment, according to Colliers’ 2024 Global Investor Outlook, we will focus on promoting Australia’s opportune position to divergent sources of global capital.  
• Colliers’ 2024 Global Investor Outlook reported an upswing in the proportion of investors planning to boost real estate allocations, with 75% of APAC survey respondents planning to dedicate 5-20% of assets under management to real estate in the future, up from 64% currently.   

Office:

Premium office rents and investor appetite will continue to elevate this asset class above the rest of the sector, with the yield spread between Premium and A Grade assets set to expand.  Similarly, the spread between Premium and B Grade office asset yields is likely to expand, as appropriate risk and costs are priced back into purchasing decisions.   

John Marasco Managing Director, Office Capital Markets, Australia, added, particularly in office, there's a real opportunity for value-add capital to maximise returns by retrofitting existing lower grade assets to achieve higher ESG credentials. These assets will not only attract a higher rental value, but also a higher quality tenant. Across the board, just as in Europe and the Americas, these strategies are becoming increasingly relevant in this region, particularly in major developed markets such as Sydney, Melbourne and Brisbane.”

Industrial:

We expect the strong value proposition and resilience of the Industrial market to continue to be underpinned by tight incentives, low vacancy and rental growth. While rents moderated slightly over Q3 2023, the Prime national weighted average rental growth rate (4%) was still significantly higher than the previous decade’s average quarterly growth rate (1.3%). Rents continued to offset yields to ensure average national Prime values increased by 2.1% over Q3 2023.   

We predict rental growth for a market that is currently renowned for the tightest vacancy rate globally (1%), will continue to exceed the historical average rate, since 50% of Industrial supply for 2024 is already pre-committed. 

After three years of core plus capital chasing short WALE Industrial assets and benefitting from the pace of rent uplifts, we’ll now see core capital become more active, targeting quality assets with long WALEs, commented Colliers Australia CEO Malcom Tyson.

The continued growth of e-commerce and the surge of interest in AI-led platforms mean that demand for data centre space continues unabated across APAC. China has the most tradeable assets, accounting for 37% of historical data centre transaction activity, followed by Japan (16%) and Australia (16%)5. Due to the lack of modern data centres, we expect more global operators to enter the market through development and hold strategies.” Commented, Gavin Bishop Managing Director, Industrial, Australia.

Read more here by Gavin Bishop Managing Director, Industrial, Australia.

Retail:

Demand will outpace market supply of Australian retail centres, which saw strong sales performance incur positive rental growth across all retail assets over Q3 2023 and an average occupancy rate of 99% nationally. 

Existing retail assets will reap the benefits of an undersupply of 2.2 million square metres of floorspace nationally by 2032, potentially absorbing an additional $20.5 billion in sales by today’s market metrics, said Colliers Australia CEO Malcom Tyson.

We are continuing to see a focus on more experience- based retail throughout Asia Pacific as a key driver for sales and footfall. It has proven to be a key differential in delivering stable performance compared to other markets,” commented, Lachlan MacGillivray Managing Director, Retail Capital Markets, Asia Pacific.

BTR Australia:

Given the dynamics of declining affordability, elevated population growth and new supply headwinds across Australia's major cities, interest in the emerging build-to-rent sector has increased from a range of capital sources. Several announced changes to federal and state tax settings are undoubtedly reinforcing the appeal of investment in Australia’s BTR sector.

Both incumbent and new entrant international capital partners, alongside increasing numbers of domestic institutions, are seeking exposure to the low-risk nature of Australia's residential real estate given its undeniable market fundamentals and policy imperatives. Real estate allocations from sophisticated investors are being attracted to the residential thematic via an asset type that is only now becoming available in the Australian market” Commented, Robert Papaleo National Director, Capital Markets Residential, Australia.

Hotels and Hospitality:

Investors are being drawn to a resurgence in hospitality and retail connected to the revival of consumer spending and tourism and business travel regionally. 

While Luxury resorts are performing strongly amid the resurgence of leisure travel and desire for experiences post pandemic, we expect capital values for the broader Australian hotel market to also remain competitive compared to global peers, as international travel ramps up and revenue defends against economic fluctuations.” Added, Karen Wales Head of Hotels, Transaction Services, Australia.

Read more here by Karen Wales Head of Hotels, Transaction Services, Australia.

The APAC region:

The APAC region has shown resilience, despite a challenging global environment. This has translated into Investment activity across the region which has accounted for 23% of total global investment volumes YTD 2023, which is 5 percentage points higher than the long-term average of 18%. APAC sales volumes are only down by 30% compared to 2022 levels, whereas global investment activity is down by almost 50%8.

We expect APAC’s commercial property market will continue to uphold its strong position on the global stage over 2024 and contribute to a growing share of global investment activity". Said Joanne Henderson National Director, Research, Australia.

About the 2024 Global Investor Outlook

The fourth edition of our annual outlook for global property investors synthesizes the views of Colliers Capital Markets experts and the results of a survey of international investors. The findings and opinions featured in the report are shaped by their responses. 

Read and download the full report 2024 Global Investor Outlook.

Related reading:

Colliers launches 2024 Global Investor Outlook - Retalk Asia 

Industrial sectors continuing to lead the charge - Colliers 

Cairns Central Retail sold for AUD$390m - Colliers and McVay Real Estate

Colliers - 2024 Australia’s BTR sector 

Hospitality and related Retail regaining strength - Colliers 2024 Global Investor Outlook