Savills Prospects December, 2023: Hotels Regain, Real Estate outlook 2024 & Investment Themes
Savills Prospects reviews the economics and trends that impacted real estate investors in Asia Pacific at the end of the year, and look ahead to 2024.
As the first global post-pandemic year came to a close, markets everywhere were wrestling with ongoing challenges in the form of structural work shifts, persistent inflation, high energy costs and a higher interest rate environment. Savills Prospects investigates what these meant for APAC real estate, and what they could mean in the immediate future.
Hong Kong’s Property Markets in 2024
Hong Kong’s property sectors had a challenging 2023, and the Year of the Dragon is poised for more adversity. In 2023, high interest rates disincentivised investors, and e-commerce continued to reshape the retail sector. Entrenching remote working models, absent Mainland occupiers and ESG demands put pressure on the office market. In the residential sector, the rising cost of financing and a spike in emigration impacted values and demand. The SAR will see more of the same in 2024, at least at first.
Interest in Hotels is Rekindled
APAC’s hospitality sector finally emerged from the pandemic in early 2023 and has been trending up ever since. Room rates in key markets grew in 1H/2023 as arrival numbers steadily climbed. Though capacity at many hotels remains restricted due to limited airlift and labour shortages, investor interest is reviving. Domestic and regional travel are underpinning the travel sector and APAC boasts solid fundamentals. Japan, India and China in particular are among the markets with the greatest potential.
Asia Pacific Real Estate Outlook 2024: Mature Market Prospects
Regardless of long investment histories, 2024 will throw up hurdles for APAC’s mature markets. Despite challenges, each market will have its opportunities. In Australia, bright spots include hotels and alternative assets. A slowing economy in Hong Kong will push office rents down, but retail rents should rise. Japan’s multifamily residential, high end hospitality and logistics sectors will remain resilient. Singapore’s residential sector should remain flat after rents and prices skyrocketed from 2022. High financing costs are finally coming to South Korea even as offices remain an investor favourite. And Taiwan’s commitment to its net zero pathways is fostering new tenant-landlord relationships.
Four for 2024: Asia Pacific Real Estate Investment Themes for the Year Ahead
Worldwide, the last few years have been defined by upheaval. A pandemic, war in Ukraine and fresh conflict in the Middle East are just the start. Demographic shifts, climate change responses and emerging technology are also having an impact. Investors have become more creative with their strategies in the wake of emerging global megatrends. Among four investment themes to watch in 2024 is growth in APAC’s underserved data centre sector. Regulation and tenant demand will power brown-to-green retrofits to meet ESG mandates. Demand for all types of residential housing will underpin the living sectors. Finally, traditional lenders are tightening up. Private real estate debt financing and the flexibility it offers will gain traction in APAC.
Author: Simon Smith
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