Asia Pacific Real Estate Market Outlook 2024

High interest rates, a slow recovery in mainland China and geopolitical tension weighed on the Asia Pacific real estate market in 2023, resulting in a subdued year for leasing and investment. While these concerns are set to persist into 2024, an upturn is set to commence by mid-year, leading CBRE to adopt “A Tale of Two Halves: Headwinds Followed by Recovery” as the central theme of our 2024 Asia Pacific Real Estate Market Outlook.

On the economic front, the U.S. economy is poised for a soft landing in 2024, with inflation falling and the labour market softening. Asia Pacific GDP growth is forecasted to slow to 3.5% in 2024 from last year’s 4.3%. While the recovery in mainland China remains sluggish, the coming months will see the launch of additional supportive measures to buoy economic growth.

The downward interest rate cycle in Asia Pacific is expected to commence in mid-2024 and will come on the back of easing CPI-inflation in most markets as well as widely anticipated U.S. interest rate cuts, which are set to start in May. Exceptions include Japan, where the Bank of Japan (BoJ) may raise its policy rate, although any increases are likely to be marginal and should not have much impact on investors' borrowing costs; and mainland China, which is expected to maintain loose monetary policy.

The office real estate market will continue to witness a supply boom, with nearly 70 million sq. ft. NFA of new Grade A space due to come on stream in 2024, pushing up vacancy in almost two-thirds of markets. Cost control will remain high on the agenda, leading firms to renew leases; focus on value for money space; and prioritise workplace optimisation. Solid tech sector demand, particularly in the software and services category, will result in a slight improvement in demand, with gross leasing volume forecasted to grow by 0% to 5% y-o-y in 2024.

In the retail space, Asia Pacific will see weaker spending growth in 2024 on the back of the softer economic outlook. Despite a cautious approach to CapEx and store network planning, retailers are poised to capitalise on favourable market conditions to upgrade and expand in 2024. Most Asia Pacific retail markets will register rental growth, although the magnitude of any increases will be modest. 

Logistics occupiers’ appetite for expansion is expected to moderate further over the next 12 months. To protect their bottom line, occupiers will give closer scrutiny to real estate plans and capital expenditure; a trend that will result in more lease renewals. Availability will increase on the back of the ample development pipeline and growing volume of sublease space. 

Expectations are that whilst hotel ADRs should normalise in most markets, occupancy growth in well-managed assets should drive revenue growth. Operators that demonstrate flexibility and capitalise on the upswing in tourism will be the main beneficiaries, particularly those in Japan and Korea.

Commercial real estate investment is expected to remain muted in H1 2024 due to limited yield expansion and high interest rates. With most markets continuing to experience negative carry, further re-pricing is anticipated across asset classes. However, H2 2024 will see an uptick in investment activity on the back of re-pricing and interest rate cuts. Demand will be led by high-net worth buyers, cash-rich investors and corporates seeking high quality assets.