Private capital is expected to remain a driving force in the Asia-Pacific commercial real estate market, according to global property advisory Knight Frank in itsNew Horizon Outlook 2024 Part 1: Asia-Pacific Tomorrow report.

Private capital including High Net Worth Individuals (HNWIs) has been proactive in commercial real estate, raising their investment exposure in 2023, with decision-making guided by the pursuit of capital preservation rather than chasing yields.

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Further, in the higher-for-longer interest rate environment, private capital is expected to persist as a driving force in the Asia-Pacific commercial real estate market.

Key factors

However, factors such as higher financing costs, global economic uncertainty, a misalignment between seller and buyer price expectations and slow repricing persist as challenges to the Asia-Pacific investment market, leading to a 53.4 per cent contraction in overall transaction volume for the first three quarters of 2023.

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Given the significant challenges in the macroeconomic landscape, 2023 is likely to close with the lowest total volume for the first time, the report noted.

“The sharp rise in bond yields has shifted the investment landscape and altered the appeal of different asset classes. However, despite the challenging macro backdrop, ample capital remains to be deployed. Opportunities for private credit and attractive entry points for assets are likely to emerge in the higher-for-longer environment, which will continue to favour long-term private investors with a low reliance on debt,” said Neil Brookes, Global Head of Capital Markets.

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