Apac real estate market to remain 'resilient' despite rising inflation: Urban Land Institute

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/ EdgeProp Singapore
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June 9, 2022 6:36 PM SGT
Cap rates in the Asia Pacific region are expected to remain stable (Photo: Albert Chua/The Edge Singapore)
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SINGAPORE (EDGEPROP) - The Urban Land Institute (ULI) is projecting a positive trajectory for the Asia Pacific (Apac) real estate market over the next three years, pointing towards a sustainable recovery following the pandemic. This is despite expectations of faster inflation rates in the region's largest economies, notes David Faulkner, president of ULI Asia Pacific.
See also: Asia Pacific real estate investment up 20% y-o-y in 1Q2022: JLL
ULI’s Apac real estate economic forecast for 2022 to 2024, which covers six major regional markets - Hong Kong, Singapore, Shanghai, Tokyo, Seoul and Sydney - shows that Australia is expected to lead the pack this year in terms of growth with a projected GDP expansion of 4.48% for 2022, well above the long-term average of 2.35%.
Japan comes in second place, with a growth forecast of 2.25% for 2022, five times higher than the 0.45% record in 2021. Elsewhere, Hong Kong, Singapore, China and South Korea are expected to record slower growth rates of 1.0%, 3.35%, 4.85%, and 2.0% respectively.
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Expectations of faster inflation have tempered the upbeat sentiment on Apac’s outlook, states ULI. Out of the six markets surveyed, with the exception of Singapore and South Korea, the rest are anticipated to see accelerated inflation rates in 2022 before these taper off to their long-term averages by 2024.
Nonetheless, the Apac real estate market is expected to weather through the short-term headwinds. “Against this backdrop, we are expecting the real estate sector to remain resilient in the next few years, with largely stable cap rates across the office, logistics, and retail segments,” ULI's Faulkner says.
For offices, ULI notes that Tokyo is forecasted to have an office cap rate of 2.60% this year, which is the lowest in the region. "The rate will likely dip to just 2.30% by 2024, reflecting continued robust demand for office assets domestically," ULI states.
ULI also highlights that for the logistics sector, Singapore is the most attractive market among the six markets surveyed, with the highest estimated cap rate of 6.40% this year.
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