This article is from the Australian Property Journal archive
AROUND USD 70 billion in dry powder is ready to be deployed into the Asia Pacific, targeting debt opportunistic and value-add assets, as investment volumes look to recover in 2025.
According to Cushman & Wakefield’s APAC Capital Markets Outlook – Midyear 2024 Update, investors are waiting for the ideal moment to restart major activity in the region, after a “wait and see” phase over the last 18-24 months.
“While there have been pockets of investment activities in the last year or so, investors have yet to fully flex their muscles across the region and globally. However, aligning capital with available and suitable assets remains a primary challenge, even though there are significant capital reserves poised for deployment,” said Gordon Marsden, head of capital markets at Cushman & Wakefield, Asia Pacific.
“Given this situation, we expect investors to target opportunistic and value-add investments, including debt. Assets and sectors that can provide elevated returns, especially through resilient income streams are likely to be most favoured.”
The Asia Pacific region has remained largely resilient even with a record interest rate hiking cycle over the last two years.
These hikes led slowing economic growth, with commercial real estate investment levels falling off by 40% from a Q1 2022 peak.
In Australia, the private debt market is currently undergoing a period of growth, as banks grow their commercial real estate loan books at 5.1% year-on-year – the slowest annual rate in four years.
With HMC Capital targeting a $5 billion private credit platform and recently acquiring commercial real estate private debt fund manager Payton Capital in a $127.5 million deal.
While $12.2 billion specialist alternative investment manager Regal Partners acquiring Adrian Redlich’s commercial real estate lending business Merricks Capital for $235 million.
“Looking ahead, we anticipate interest rate cuts to be gradual and measured, with variations in pace and magnitude across APAC,” said Dominic Brown, head of international research at Cushman & Wakefield.
“The fundamental drivers of growth in the region remain strong, underpinning its status as the ‘decade of Asia Pacific.’ Regional growth is forecast to stabilise around 4% over H2 2024 and through 2025-26. This is reflective of normalising growth in emerging markets like India and recovery in advanced economies such as Australia and Japan.”
Despite this positive outlook, Cushman & Wakefield noted multiple risks to the market including increasing geopolitical tensions and high levels of government and household debt.
With other potential factors impacting the market including growth in alternative and “through the cycles” asset classes and the continuing rise in gen AI technology and the significant real estate needed to support its growth.
This as CBRE’s annual Global Data Centre Investor Survey, recently found that 97% of investors are planning to increase their investment into data centres in 2024.
With CBRE’s Q1 Asia Pacific Data Centre Trends report revealing new Australian data centre supply is now fully contracted, due to this rapid cloud adoption and AI demand.
