• Global transaction activity hit a new record level in 2021
Global real estate market recovery is expected to hit the fast lane, with Q4 2021 volumes driving an annual increase of 55%. According to Cushman & Wakefield’s The Signal Report: Global Guide to CRE Investing In 2022, demand will be just as strong this year, and while finding the right opportunities will remain an issue, activity in the first half of the year is expected to exceed 2021, with a 3% uplift forecast for the year overall. Asia Pacific has been leading the recovery to date, with an earlier return of growth and pre-pandemic levels of investment activity in most markets. This momentum looks set to remain despite a COVID-led easing in Q1, and it will be strengthened by a deeper and wider level of occupier demand later in the year.
Greater China Investment Landscape
Across Greater China, investment transactions in 2021 totaled over RMB380 billion (US$60 billion), approximately 40% above the 2020 volume. Despite the challenging situation in Hong Kong, the city witnessed a return to positive leasing absorption over the second half of 2021, with the second highest investment volume in Greater China at more than HKD64.3 billion (US$8.2 billion) for the year, behind only Shanghai’s total of RMB106 billion (US$16.8 billion). In the mainland market, despite ongoing travel restrictions, inbound investment managed to command an impressive 28% share of the total transaction volume.
“We’ve seen alternative asset classes, such as logistics, data center, multi-family and life science facilities in high demand in the last two years due to the impact of the pandemic. However, with expected relaxations of travel restrictions in various countries and cities, we now start to see office building transactions coming back to the market. Especially, office end-users taking the opportunity to acquire their own office buildings to meet their long-term occupational needs in China. We forecast that this trend may spill over to Hong Kong as mainland China corporations start to look for office space once the border is reopened,” said Francis Li, International Director and Head of Capital Markets, Greater China, Cushman & Wakefield.
Greater China Office Market Dynamics
“Total net absorption of prime office premises in Greater China markets in 2021 reached an annual record of 5.3 million square meters,” added James Shepherd, Head of Business Development Services, Greater China, Cushman & Wakefield. “This impressive ramp up in leasing activity, commencing a year and a half ago and running through 2021, pushed the Greater China office market back into a commanding position in terms of leasing activity in Asia Pacific. Looking ahead, given the short lease terms of typically three years prevalent in China, we should be on the lookout for another boom in activity in two to three years’ time, as those lease agreements signed during the boom period of the last one and a half years come up for expiry.”
Asia Pacific Outlook
Transaction activity followed the earlier economic recovery of the APAC region, with 2021 investment volume exceeding pre-Covid levels following a comparatively mild 10% drop in 2020. This momentum will be maintained with both 2022 and 2023 expected to record double-digit volume growth as the economic recovery invigorates the occupier sector. Availability of stock is a potential headwind facing investors, but with interest rate increases expected to be gradual, this should maintain investor confidence.
“Asia Pacific enters 2022 with strong underlying momentum but greater than expected short-term headwinds from the spread of Omicron. However, the momentum will assert itself in Q2, building upon the region’s re-emergence from prolonged lockdowns,” said Dr. Dominic Brown, Head of Insight & Analysis, Asia Pacific at Cushman & Wakefield. “The regional economy will regain the top spot in terms of the pace of economic growth in the second half of 2022, extending into 2023. Occupier markets are therefore forecast to strengthen in the year ahead, with demand more widely spread across the region.”
Global Investment Landscape
“Uncertainty will remain high due to the virus, inflation, and geopolitical tensions, but most indicators point to a steady improvement in confidence at a social and business level globally as 2022 progresses. This will lead to a rising cycle of performance for most markets despite differing structural headwinds,” said David Bitner, Head of Capital Markets Insights, Global Research at Cushman & Wakefield.
The virus will continue to dominate in early 2022, but increased global immunity and greater knowledge about the virus will allow for a slow improvement and for return-to-work strategies to get back on course. This suggests better economic growth before the summer, which will feed occupier and investor confidence, though this could be undercut by rate volatility and geopolitical risk. In the second half of 2022, improving economic growth will hopefully be accompanied by better news on inflation and COVID-19. With government subsidies being reduced, the private sector will take over as the driver of expansion, and occupier markets will grow more confident.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms in the world, with approximately 50,000 employees in over 400 offices and 60 countries. In Greater China, a network of 22 offices serves local markets across the region, earning recognition and winning multiple awards for industry-leading performance. In 2021, the firm had revenue of $9.4 billion across core services including valuation, consulting, project & development services, capital markets, project & occupier services, industrial & logistics, retail and others. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.