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As with the rest of the world, Asia Pacific was rocked by the pandemic and the many possible variants of Covid still pose a serious risk, yet 2022 is predicted to be a period of record growth. 

Analysis presented in the ‘Asia Pacific Real Estate Market Outlook 2022’, report recently published by US commercial real estate services and investment company, Coldwell Banker Richard Ellis’ (CBRE) predicts that both the economy and commercial real estate sector (office, retail and logistics leasing and investment) will experience renewed interest and an uptick in demand in 2022. Based on high liquidity, a substantial year-on-year increase of 5% and 10% in transaction volume is predicted across the region.

The increase in demand for leasing commercial property is expected as working patterns start to normalise, as more people return to the office.  Regardless of new strains of Covid (such as Omicron) companies are returning to the office, with many larger and multinational companies adopting a rotation or limited occupancy system. The majority offices in Asia Pacific are expected to fully reopen by Q2 2022, if not before.

Here are some of the main takeaways from the report:

15% increase in Asia Pacific stock
In 2022, Grade A office supply in Asia Pacific is expected to reach a year-on-year increase of 15%, resulting in the highest stocks for over 10 years. There will be continued expansion throughout the year, with India and South East Asia driving growth.  The majority of the stock will be in mainland China, including Shanghai and Shenzhen and India, which will account for 30% of the new stock.

22% rent growth in 2022
Despite the substantial increase in new stock, the demand for newer, green buildings in prime locations is expected to result in the highest rate of rent growth within 20 years. CBRE predicts that Grade A commercial property rent will increase by around 10% in 2022. Conversely, Australian markets are expected to stabilise during 2022, but due to a dramatic reduction in rental demand, it will take up to 5 years before rental rates return to the pre-pandemic levels.

48% of leases for expansion
CBRE’s ‘Leasing Market Sentiment Survey’ found that since May 2021 there has been an increase in leasing enquiries of 24% of which 48% pertain to the expansion. Unsurprisingly, in 2021 the technology sector was driving the demand for expansion, followed by fintech, insurance and investment and wealth management companies.

Asset enhancement
A trend towards flight-to-quality is expected as organisations seek to relocate to improve efficiency and logistics, thereby driving up demand. There will also be a strong focus on ESG investing, leading to a higher demand for green buildings, which are more energy efficient and healthier environments, including a wider range of occupier activities such as gyms and communal social areas.

Logistics real estate
Almost 80% of respondents to CBRE’s ‘Asia Pacific Logistics Occupier Survey’ plan to expand their real estate investments in the next few years. The region is expecting exports to achieve 4% year-on-year growth throughout the year. Growth will be driven by e-commerce, third party logistics and traditional retailers as they strive to improve distribution networks and cold storage networks (food, grocery and manufacturing industries).

Record high investment interest in commercial property
Investment in commercial real estate has surged forward due to the state of inertia during pandemic, when investment was all but suspended. Total investment volume is expected to reach a record high equating US$150 billion.

Hotels
The recovery of the hotel market has been hampered by the slow opening of borders. However, investors are already recognising the opportunities within a buyer’s market.

Notwithstanding the challenges presented by the pandemic, the smart money foresees 2022 as being overall positive for both the economy and commercial real estate in the Asia Pacific region.