Delayed US rate cuts means slower recovery for Asia-Pacific commercial property market, CBRE survey shows

Investment in Asia-Pacific commercial property market is not expected to rebound until later this year or early 2025, given still-elevated financing costs

Bets on early US rate cuts by midyear have failed to materialise due to stronger factory, inflation data in recent months

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Pedestrians cross an intersection in the Shibuya district of Tokyo, Japan, on Thursday, May 2, 2024. Photo: Bloomberg

Published: 3:31pm, 6 May 2024Updated: 6:07pm, 6 May 2024

A recovery in commercial real estate investment in Asia-Pacific is likely to be delayed until later this year or early next year as bets on interest-rate cuts failed to materialise and buyers remained on the sidelines for longer, according to CBRE. Japan was the top-ranked market on solid fundamentals.

Investment fell by an annual rate of 14 per cent in the region last quarter as high interest rates kept prices of commercial properties elevated, according to a survey published by the property consultancy on Monday. Investors in the region, especially real estate funds, property companies, and banks – were notable net sellers, it added.

CBRE surveyed 136 people in the region from April 1 to 17.

Investment volume in mainland China declined by 23 per cent from a year earlier, with most acquisitions being made by domestic corporations. Sellers outnumbered buyers in Hong Kong, where 69 per cent of the survey respondents indicated “stronger selling intentions,” CBRE said.

Modern office buildings in Central, Hong Kong. Photo: Shutterstock

Economists have pushed back forecasts on US rate cuts after the economy continued to show strength, with latest reports showing higher factory output in March and sticky inflation in February. There is less than a 50 per cent chance of a cut in the Federal Reserve’s target rate in the June and July meetings. The odds are more than 50 per cent for one or more rate cuts in the September meeting, according to data compiled by CME Group.

CBRE said Japan overtook China as the most active investment market for commercial properties last quarter. The nation contributed 30 per cent to total investment volume in the region, as cheaper borrowing costs and stronger fundamentals worked in its favour, it added.