Wednesday, July 24, 2024

Private Capital to Drive Asia-Pacific Commercial Real Estate Growth: Knight Frank Report

Private capital is anticipated to play a pivotal role in shaping the future of the Asia-Pacific commercial real estate market, as outlined in Knight Frank’s New Horizon Outlook 2024 Part 1: Asia-Pacific Tomorrow report.

In 2023, private capital, including High Net Worth Individuals (HNWIs), has displayed active involvement in the commercial real estate sector, focusing on capital preservation rather than pursuing higher yields.

Despite challenges such as increased financing costs, global economic uncertainties, discrepancies in price expectations between sellers and buyers, and a gradual repricing, private capital is expected to continue as a key driver in the Asia-Pacific commercial real estate market amid a higher-for-longer interest rate environment.

Key Considerations:

  1. Investment Landscape Challenges: Higher financing costs, global economic uncertainty, and misalignment in price expectations have led to a 53.4% contraction in overall transaction volume during the first three quarters of 2023.
  2. Macroeconomic Landscape Impact: Given the substantial challenges in the macroeconomic landscape, 2023 is projected to conclude with the lowest total transaction volume, marking a significant shift in the market dynamics.

Neil Brookes, Global Head of Capital Markets, emphasized, “The sharp rise in bond yields has shifted the investment landscape and altered the appeal of different asset classes. However, despite the challenging macro backdrop, ample capital remains to be deployed.”

In the face of these challenges, the report suggests that opportunities for private credit and attractive entry points for assets are likely to emerge in the higher-for-longer environment, favoring long-term private investors with a low reliance on debt.

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