The real estate landscape of Asia-Pacific is expected to showcase optimistic performance in 2024, with a projected growth of 43.7 per cent in Asia-Pacific logistics supply, offering a respite from the tight supply conditions that have characterized the region, said the New Horizon Outlook 2024 by Knight Frank. Despite this surge, the report added, the average rent is expected to maintain an upward trend, furthermore, at a more moderate pace, owing to resilient demand. In the APAC region, it said, India along with China will lead Grade-A office supply in 2024 and together, it will constitute almost two-third of the expected 10 million sqm (108 mn sqft) of office supply.
The report attributed the increased interest from homebuyers to favourable dynamics around homeownership, stable mortgage rates, and rising property prices. It added that in India, the residential, office and warehousing market is expected to remain buoyant in 2024, wherein Mumbai is expected to report a 5.5 per cent increase in prime residential prices in 2024, driven by high demand and strong economic growth. Warehousing market, meanwhile, will be aided by decentralisation of supply chains and manufacturing focus of the government.
Shishir Baijal, Chairman and Managing Director, Knight Frank India said, “The residential sector exhibits substantial growth potential, underscored by sustained demand over the past few years, complemented by consistently stable interest rates and robust GDP expansion. Notably, there is a pronounced demand for mid- and high-priced residential properties.”
“The resilience of the Indian economy has also catalysed the recovery of the office sector, which is steadily rebounding from its pandemic-induced downturn. Fuelled by the robust demand from India-facing businesses and Global Capability Centres (GCC), we anticipate office leasing to surpass last year’s trend. Looking ahead, we envisage a continued upward trajectory for both the residential and office sectors, well-supported by ongoing GDP growth,” Shishir Baijal added.
According to forecasts by Knight Frank, the broader economy in APAC region will be the fastest growing in 2024, and growth across over two-thirds of the region’s major economies is expected to remain stable or to accelerate in 2024.
Major trends to power real estate fundamentals in APAC region
Continued urbanisation: The region’s demographic challenges are well-known. A declining number of marriages and the resultant fall in birth rates – a consequence of rapid economic progress – will see population growth slow through the decades ahead. However, its urban population will continue to grow, fuelled by the ongoing trend of rural-to-urban migration.
Magnet for foreign investment: Foreign direct investment (FDI) inflows from UNCTAD show a shift in investments towards Asia-Pacific following the pandemic. While inward FDI fell by 12.4 per cent globally in 2022, those into the region have bucked the trend to rise by close to 8 per cent. The region accounted for 55 per cent of global inward FDI in 2022.
More than half of Asia-Pacific will be middle-class by 2024: According to World Data Lab, of the 113 million that will join the ranks of the global middle class, over 80 per cent will be in Asia-Pacific. This development represents a historic turning point, as the proportion of the region’s population living below the poverty line is poised to fall below 50 per cent for the first time.
Largest working-age population: Paired with conducive policies, the young, fast-growing labour pools in South Asia and most parts of Southeast Asia are expected to fuel the region’s competitive advantage continually. By 2025, about 68 per cent of the population in the ASEAN region will be of working age.
Sectoral outlook in APAC region
Residential sector: The region is expected to return to mid-single-digit growth in 2024 as sentiments recover, and investor confidence is restored. The bright spots emerged in Australia, New Zealand, and India, said the Knight Frank report. In Australia and New Zealand, immigration and limited supply have helped to reverse the sentiments arising from higher mortgage rates. Auckland and Sydney are both poised for a further 5 per cent growth in prices in 2024.
Capital Markets: Private capital remains a driving force in the Asia-Pacific commercial real estate. Amidst times of crisis, opportunities persist, enabling investors to access favorable assets that offer capital appreciation and positive rental reversions. Thematic sectors such as living spaces, life sciences, and data centers present promising prospects, said the report by Knight Frank, adding that the total Asia-Pacific multi-family investment volume for the year is set to surpass the previous high in 2020.
Office: Most occupiers in Asia-Pacific have adopted an ‘office-first hybrid’ strategy. In view of this new workplace equilibrium, the demand-supply dynamic in Asia-Pacific is in the best position to support occupiers. Overall, the market conditions for the Asia-Pacific prime office sector will continue to favour tenants in 2024, with the vacancy rate to trend upwards to 14.4 – 18.3 per cent from the current 13.9 per cent.
Logistics: While economic headwinds have induced caution in logistics occupier markets, prime logistics spaces remained supported by resilient demand. With the pandemic in the rearview, e-commerce demand growth has waned. However, disruptions from geopolitical tensions, lingering concerns from the pandemic and environmental themes are redefining the region’s logistics footprint, which can continue to fuel occupier demand.