Investment activity in the Asia Pacific (APAC) is expected to pick up in the second half of 2023, according to a new survey made by CBRE. Capitalisation rates, or cap rates, that measure sale prices of properties compared to their annual income are projected to increase over the next six months. This expansion is most likely to be seen in core office and retail assets.

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This survey revealed that investors will be more confident in the second half of 2023 with reduced uncertainty regarding interest rates and an increase in cap rates helping close the gap between buyer and seller price expectations. Exceptions to the rise were recorded in Japan and mainland China due to stable interest rates.

Meanwhile, CBRE believes that prices are near their peak for traditional logistic spaces, due to buyers looking for discounts. On the other hand, they note that most sectors such as Grade-A offices, retail, and hotels have seen a narrower price gap. Clarity is anticipated to be gained in the coming months regarding interest rates, as most Asian economies have seen them stabilising in recent months.

Private investors have the strongest buying appetite, as almost 60% of survey respondents expect APAC investment activity to resume in 2H2023. Japan is expected to lead the investment recovery, followed by Mainland China and Hong Kong in 3Q2023. Singapore, India and New Zealand are forecasted to experience an uptick of activity in the fourth quarter.

Regarding financing, cost and availability are the biggest considerations for investors in evaluating potential acquisitions. Higher interest expenses and stricter lending standards have caused refinancing pressure for some real estate funds and REITs. CBRE predicts that Korea logistics, Australia offices and Hong Kong offices will confront the biggest funding gap in the upcoming 18 months.