Investor demand for Asia-Pacific commercial real estate remains strong, with an overwhelming 92% of respondents to CBRE’s new survey indicating that their investment activity this year will be the same or greater compared to 2017.
The two main objectives driving investment in commercial real estate are the desire to secure stable income streams and asset class diversification, according to CBRE’s fifth annual Asia Pacific Investor Intentions Survey 2018.
While concerns about potential global and domestic economic shocks have diminished for the second consecutive year, investors are more concerned about higher property prices.
“The high price of core assets and search for higher returns continues to drive investors towards core-plus/good secondary - which entails investing in prime assets in non-core areas, or non-prime assets in core areas - and value-added assets,” CBRE said. “This marks the first time that value-added has overtaken prime core as the most preferred asset.”
With investors shifting towards core-plus and value-added strategies, their focus is broadening away from the traditional primary markets of Shanghai, Sydney, and Tokyo. Several cities are gaining ascendancy, led by Melbourne, Singapore, Brisbane, and regional cities in mainland China and Japan.
Melbourne has eclipsed Sydney as the most attractive investment city in Australia, due to stronger rental growth and a tight vacancy rate.
“Brisbane received stronger interest from cross-border investors considering counter cyclical plays, with office rents recently bottoming-out after a five-year correction and expected to recover over the next two years,” CBRE said.