2015 is set to see property across Asia Pacific experience a continued increase in investment volumes, improved tenant demand and structural change across various sectors.
According to Colliers International’s 2015 Asia Pacific Property Outlook, two key themes for the year ahead will see technology continue to change the property industry and investors continue to diversify from core assets to other markets and sectors.
John Kenny, Colliers International chief executive, Australia & New Zealand, said 2014 could be summarised as the year that investment in property continued to accelerate, New South Wales returned as a growth economy, and the market saw signs that leasing demand was on the return.
“Ownership of Australian property continued to become concentrated amongst fewer owners,” Mr Kenny said. “Strong flows of capital continued to enter the Australian property market both from offshore and overseas.
“By mid-November, transaction volumes were well up on 2013 levels and although total volumes are still some way off the 2007 peak, some sectors such as the national industrial market and the Melbourne CBD office market have now exceeded volumes in that year.
“The majority of sales are now to Australian investors. This is not surprising given that Australian investors are now recognised as the most confident in the world, according to our most recent Global Investor Sentiment Survey.”
Offshore investors also continued to enter the market with new groups emerging, particularly from China. Chinese investment continues to dominate headlines and is emerging as a major source of outbound capital, targeting all regions across Asia Pacific. Singapore, however, continues to remain the dominant player, a place it has held for a prolonged period.
“There is pent-up underlying demand from investors, primarily due to the lack of stock, and that will gradually be satisfied,” said Dennis Yeo, Chief Executive Officer, Asia at Colliers International. “However, there are increasing challenges for investors looking overseas, not least the narrowing of the gap between yields in Asia and in overseas markets.
Meanwhile, the occupier market has a far more positive outlook for 2015.
“We are seeing improving signs in the occupier markets in both Australia and throughout Asia,” Mr Kenny said. “Although vacancy rates continued to rise and incentives stayed at high levels in 2014, tenant enquiry began to increase with the Sydney CBD showing the biggest jump in Australia.
“So, what do we expect for 2015 Definitely more of the same, with investment volumes likely to continue to rise and tenant demand continuing to improve.
“Structural change is also expected to become more apparent with improvements to technology making a difference across all sectors.”
Nerida Conisbee, Colliers International national director of research, said technology continued to infiltrate the fabric of society and was making major changes to the property industry.
“In 2014, there was a jump in the number of technology firms looking for office space across all our CBD in Australia,” she said. “Similarly, workplaces continue to evolve and change as technology makes us more mobile. An explosion in the amount of data is starting to change the way that we interact with buildings and allows owners to optimise building performance.
“Big data is starting to facilitate a better understanding as to what kinds of spaces work best in terms of tenant health and energy efficiency. This is also expanding to whole cities with detailed monitoring of traffic volumes and crime levels starting to make cities more efficient, safer and cleaner places to live.
“Technology changes are cutting across all sectors. Whether it be 3D printing starting to change manufacturing processes, online retailing continuing to evolve and change the way we shop or websites such Airbnb and Uber changing the way we travel for work or leisure.
“Continued evolution in the way we live, work, shop and interact with the built environment is assured with technological change.”
Colliers International was also forecasting a continued move away from core assets in 2015.
“Core property continues to attract the most capital and the gap between prime and secondary yields remains historically high across all sectors,” Ms Conisbee said. “Post GFC, most buyers still remain risk-averse and a large proportion of the capital is focused on high-quality properties with low levels of leasing risk.
“In 2014, we did start to see a small group of investors begin to move away from core assets and towards markets and sectors that are higher yielding or have development potential. The most obvious of these were a large number of Asian developers buying secondary CBD office buildings in Melbourne and Sydney to convert or redevelop for residential purposes. This resulted in some yield compression in both these cities.
“Other non-core investment categories that started to see strong interest were metropolitan office markets. Sectors such as retirement living, which have attracted very little institutional interest since the GFC, began to develop a higher profile. Similarly, New Zealand began to attract more interest from offshore investors. This trend is likely to continue in the year ahead.”
