by PwC and the Urban Land Institute (ULI) released their annual report on the Emerging Trends in Real Estate Global Outlook on March 12, which highlighted the concerns of property investors in the Asia Pacific (Apac) region. The report gathered insights from global asset managers including Blackstone, Savills Investment Management, and CBRE Investment Management, among others. Among the top concerns of investors in the region are low yields, persistently high interest rates, and geopolitical tensions. These issues were highlighted by over 70% of the survey respondents.
According to the survey, Asia Pacific remains an attractive region for diversification due to its population growth, demographic metrics, and divergent monetary policies. However, last year’s real estate transactions in the region only grew by 13% year-on-year to US$173.5 billion ($231.3 billion), while Europe and Middle East and Africa (EMEA) saw growth rates of 12% and 11%, respectively. This trend is expected to continue, with Europe and North America set to see further improvement in transaction volumes while Asia Pacific remains sluggish.
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In 2020, China’s real estate transactions declined by 25% year-on-year to US$418.3 billion ($557.6 billion), while Hong Kong SAR saw a 1% decrease to US$15.7 billion ($20.9 billion). This is in contrast to Europe, where the top concerns among asset managers were international political instability, escalation of the war in the region, and Europe’s economic growth.
According to data from MSCI, US commercial property prices remained stable last year, with a decrease of only 0.7%. This has led some investors to focus their attention and capital on Europe and North America. However, the report noted that data center assets have emerged as the top investment and development prospects in all three regions, with global demand reaching record levels last year.
Green Street, a New York-based research firm, reported that asking rents for data centers grew at a double-digit pace in 2020. Additionally, MSCI predicts that 2024 will be a standout year for this asset class, with a projected 60% increase in acquisitions of existing data centers in the US through single property and portfolio deals.
In line with this trend, last September saw the largest commercial real estate deal ever recorded in Asia Pacific and globally for 2024. Blackstone and the Canada Pension Plan Investment Board (CPP) jointly acquired data center firm AirTrunk from Macquarie Asset Management and the Public Sector Pension Investment Board for over US$16 billion ($21.3 billion). This highlights the increasing importance of data centers in the real estate investment landscape in the Asia Pacific region.