2021 real estate investment trends in Asia-Pacific

The Asia-Pacific outlook

The economic impact of Covid-19 has, to date, been less extreme in many major Asian markets compared to the West. Bolstered by strong domestic demand, commercial property transactions in South Korea and the Chinese Mainland remained stable throughout 2020 – though markets reliant on cross-border transactions such as Hong Kong SAR and Singapore witnessed a more drastic fall as lockdowns impeded liquidity.

With the development and rollout of the vaccine, there is consensus that Asia-Pacific markets will see a measure of recovery in 2021. However, this will be uneven across the region due to logistical challenges around transporting the vaccine, thereby deepening the divergence in geographical and sectoral performance in 2021.

Sectors

As we discussed in our Active Capital research, the notion of positioning for resilience remains at the heart of any investment decision. In Asia-Pacific, core, well-let commercial assets with long-term income prospects continue to be in demand.

Some pundits have questioned the strength of occupier demand, though offices are far from facing an existential threat, even if the way we work has irrevocably changed. The office sector will continue to play a prominent role in portfolio allocations: in 2020, offices attracted 47% of all transaction volumes within Asia-Pacific.

Assets best placed to weather shocks and benefit from the recovery and broader structural changes have seen a similar surge in interest, with industrial, warehousing and data centres proving to be the biggest winners. Across Asia-Pacific, the market share for industrial assets has increased by more than 50% compared to its historical five-year average.

Intra-regional investment

Recovery to pre-Covid volumes may not happen soon, but capital flows between liquid and trusted global safe-havens will continue. For investors, cross-border property investment offers true diversification and more options to meet revenue targets. In a period where physical travel remains subject to restrictions, intra-regional investment into 'near neighbour' locations will become ever more compelling, with investors from Singapore and Hong Kong SAR, stepping up investment into the Chinese Mainland.

Based in Singapore, Neil heads the Capital Markets business for Knight Frank in Asia-Pacific, primarily responsible for the sale of major assets to investors in the region. Over the last 15 years, Neil has brokered over US$7.5bn in cross-border transactions.