Private capital is expected to remain a driving force in the Asia-Pacific commercial real estate market, according to global property advisory Knight Frank. According to the report, private capital including High Net Worth Individuals (HNWIs) have been proactive in commercial real estate, raising their investment exposure in 2023, with decision-making guided by the pursuit of capital preservation rather than chasing yields.
With abundant cash reserves, the reliance on debt for acquisitions is eliminated, enabling HNWIs to secure assets at competitive prices swiftly. In the higher-for-longer interest rate environment, private capital is expected to persist as a driving force in the Asia-Pacific commercial real estate market.
Higher financing costs, global economic uncertainty, a misalignment between seller and buyer price expectations and slow repricing persist as challenges to the Asia-Pacific investment market, leading to a 53.4% contraction in overall transaction volume for the first three quarters of 2023. Given the significant challenges in the macroeconomic landscape, 2023 is likely to close with the lowest total volume for the first time.
Market volatility has driven investors to prioritise stability, maintaining a conservative risk appetite and favouring core assets. The Chinese mainland is another up-and-coming living sectors market. Although still in its formative stage, the sector holds significant growth opportunities owing to its vast population of 1.4 billion and the challenges that families and young professionals encounter when purchasing apartments.
Some institutional players have already forayed into the nation, capitalising on the aforementioned factors, and strategically gaining first mover advantage.
