Colliers, 2023 Global Investor Outlook Report
Stabilization expected around mid-year, with pricing and pace of recovery to vary
Colliers (NASDAQ and TSX: CIGI), a leading real estate professional services and investment management company, has released its 2023 Global Investor Outlook report, forecasting that the global real estate market will stabilize in the middle of 2023. Despite heightened geopolitical tensions, economic shocks, and erratic monetary policy over the past year, price adjustments are already progressing rapidly in markets such as the U.K. and the U.S. However, since this is not a universal phenomenon, investors expect that price adjustments in 2023 will vary significantly by sector and market.
▲Asia Pacific investors optimistic about economic growth- The Asia Pacific region holds the most optimistic outlook on economic growth in the world. More than half (53%) of Asia Pacific investors expect a positive outcome from regional economic growth, a more positive assessment compared to 41% in Europe, the Middle East and Africa (EMEA) and 38% in the Americas. In addition, 43% of Asia Pacific respondents took a positive view of the outcome of global economic growth, a figure higher than in Europe, the Middle East and Africa (38%) and the Americas (28%).
John Howald, Executive Director of Capital Markets and Investment Services for Asia Pacific at Colliers (Head of International Capital, Asia Pacific), said, "In 2023, the Asia Pacific region looks set to outperform any other region. However, the next 12 months are expected to be challenging, led by key markets such as Australia, Hong Kong, Korea and Singapore, and multinational investors with significant exposure to the European and North American markets will find that investment in Asia is somewhat safer from the current inflation and interest rate environment. Furthermore, as debt markets stabilize and volatility declines, M&A activity is expected to be revitalized by private equity in 2023."
▲Rising costs and challenges ahead- Operating and construction costs, worsened by supply chain issues and rising energy prices, are compounding the difficulties investors face amid inflation and interest rate hikes. Asia Pacific investors cited interest rates (88%), rising construction costs (87%), and high asset operating costs (77%) as the factors that will most negatively affect the execution of their investment strategies next year. Globally as well, interest rates (88%) were cited as the biggest concern, followed by inflation (74%) and supply chain disruptions (68%).
▲Strong preference for core assets- Market volatility has led investors to focus on fundamentals and defensive assets. In 2023, the top three sectors preferred by Asia Pacific investors were office (68%), industrial and logistics (65%), and multifamily housing/build-to-rent (42%), consistent with investors worldwide. While core assets located in established major cities (74%) emerged as the preferred choice for Asia Pacific investors, sectors closely tied to demographic and economic conditions—such as multifamily and senior housing—are driving activity in smaller growth cities. Interest in retail is also rising, with 52% of Asia Pacific respondents indicating a willingness to invest in suburban shopping malls (the highest figure in the world), and 48% choosing CBD/high street retail.
▲Investment opportunities created by liquidity and sustainability- Environmental, social and governance (ESG) criteria remain a key factor influencing investment decisions in the Asia Pacific region. This is driven not only by the flight-to-quality trend occurring in major office markets, but also by the need to respond to tenant demands and lower long-term asset operating costs.
In the Asia Pacific region, 66% of investors said they have already implemented or are currently integrating measures to improve the environmental performance of their assets (e.g., capital improvements, disposition or acquisition strategies to incorporate ESG considerations), compared to 75% of investors worldwide. Meanwhile, 40% of Asia Pacific investors said they plan to dispose of up to 50% of assets that do not align with their ESG investment strategy, compared to 53% of investors worldwide.