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Will commercial real estate opportunities drive business progress? | Value Chain Asia

Will commercial real estate opportunities drive business progress? | Value Chain Asia

Infrastructure investments, especially commercial real estate, ramps business expansion and management in Asia.

Infrastructure investments, especially commercial real estate, ramps business expansion and management in Asia. These assets provide physical access to Business-to-Business and Business-to-Consumer means of doing business operations. Therefore, catering to a wider range of clients.

Moreover, the said initiative provides employment as businesses require a workforce. It’s also a  way of entering or strengthening presence on a particular market.

One scenario is DHL’s 350 million euros-worth investment in Southeast Asia. They targeted their efforts towards the development of their warehouse capacity in regards to increasing their workforce to 3000. 

In APAC, Private capital is expected to remain a driving force in the Asia-Pacific commercial real estate market. Global property advisory Knight Frank depicted this in its “Horizon: Asia-Pacific Tomorrow report.” 

Said report showcased private capital investment volume for high-net-worth individuals (HNWIs) in commercial real estate. They are expected to be on track to be the highest in five years. Wherein, the current market value is at USD 4.3 billion in 2023.

On HNWIs’ intentional initiatives

Certain HNWIs investors 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, reliance on debt for acquisitions is eliminated, enabling HNWIs to swiftly secure assets at competitive prices. Private capital is expected to persist as a driving force in the Asia-Pacific commercial real estate market in the higher-for-longer interest rate environment. 

Opportunities continue to prevail in times of crisis

Market volatility has driven investors to prioritise stability, maintaining a conservative risk appetite and favouring core assets. According to an ANREV 2023 Investment Intentions Survey, nearly half of the respondents preferred core investment strategies, marking the highest level since 2014. 

Li added that the shift to a core strategy was expected because such assets are known for their stability, lower risk profiles, long-term appreciation, stable cash flow, and inflation hedge. All are advantageous in the current inflationary environment. 

She noted that despite certain central banks in the region beginning to lower rates to stimulate economic growth, the likelihood of sustained elevated interest rates until the end of 2024 or early 2025 leads us to project that investors will maintain a strong interest in core assets to mitigate portfolio risks.

Tilt to core strategies to drive living sectors expansion

The nascent asset class is no stranger to investors as the market cap reached US$ 6 billion a decade ago, with Japan commanding the lion’s share of capital as it is the only established multi-family market in the APAC region. 

Meanwhile, last year, Hines, a U.S-based developer, acquired multifamily properties. They are in Tokyo and Kyoto. Said properties can experience a boost in value after five years, potentially at $1 billion. 

For 2024, commercial real estate will continue to grow up to 3.49%. Statista’s data showed that the current stature of the market value is set toward $57.11 trillion by 2028.

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