Asia Pacific is forecast to return to world leading growth in the second half of 2022, which is maintained into 2023. As growth in North America and Europe moderates in 2022 the situation in Asia Pacific is more robust with growth of 4.5% per annum forecast for the next two years.
The APAC region certainly has a few factors on its side:
- Hit first by the pandemic, it went into recovery mode ahead of EMEA and The Americas.
- India is forecast to lead the pack in 2022 with growth averaging over 9% for the year, in large part due to restrictions being lifted and a resultant leap in domestic consumption and production. Similarly, Singapore, Japan and South Korea are all forecast to experience above average growth.
- With the exception of Australia, working from home has not been widely adopted at the levels we’ve seen in other regions, resulting in office demand in 2021, set to beat 2020 numbers by 77% across the region. Going into 2022, demand is set to increase further – before returning to pre-pandemic levels in 2023.
The Asia Pacific office market has shown remarkable resilience, being the only region to record consecutive quarters of positive net absorption since the onset of the pandemic.
The short-term issue facing Asia Pacific is supply, as opposed to demand, with many markets across the region entering a period of restrained supply over the next two years.
New supply for 2022-2023 in 15 markets is forecast to be below the 2015-19 average. This is largely due to the pandemic slowing, if not completely halting planned new builds. This lack of supply is also impacting vacancy levels, which are forecast to increase to 18% in 2023. This is heavily influenced by Indian markets which account for 50% of the increase in vacancy to 2023. The main exceptions to low supply include Tokyo, Hong Kong, Hanoi and Ho Chi Minh City.
Investment volumes look set to escalate in 2022 backed by record lows interest rates, real estate as an inflation hedge, record amount of dry-powder capital and an intensified focus on capital deployment by investors.
Total regional investment volume in 2022 is expected to be on par with the recent 2019 peak at around $180bn, though with upside potential to exceed this figure should sufficient assets be brought to market.