Gurugram, 27 April 2021 –
• Many major industrial markets across Asia Pacific moved in a downward trajectory, including cities in China, India, Japan, Australia and New Zealand. This underscores a greater pull by investors towards logistics assets as a safe haven amid ongoing uncertainties.
• In Australia, all markets studied showed a dip in industrial cap rates on the back of stronger investor appeal brought about by longer lease terms. Stronger investor demand is also bringing industrial cap rates down in Tokyo, Shanghai and Beijing. In Auckland, vacancy rates are at about 2%.
• Retail cap rates across Asia Pacific remained mostly flat with a few exceptions – Beijing, Shanghai, Mumbai, Melbourne, Sydney and Brisbane. The higher income risk from this sector has hampered demand for this asset class.
• Office cap rates also remained largely flat; however, cities in China and India saw cap rates trend upward. There are several reasons for this; in China, for example, new supply in Beijing, coupled with softening demand, is placing upward pressure on cap rates. In Bengaluru, office market demand is also plateauing due to softer demand, but smaller developers are attempting to limit vacancies and offloading assets at discounted capital values.
According to Ajay Sharma, Managing Director, Valuation Services, India, ”Given the prolonged restrictions that were localised within India, e-commerce continued to be the best bet for addressing consumer demand and has driven the requirements for the warehousing and logistics space. Further, movement of traditional brick & mortar businesses into online space for marketing further has pushed up the demand for quality warehousing, which has had impact on their rentals. This has led to downward movement of the cap rate marginally in an already attractive and safe asset class. The demand is only expected to accelerate with the evolving situation in India making the asset class top priority in terms of both institutional and retail investments.
Demand for commercial office spaces continued to be subdued and the supply of commercial office stock both from large and small developer perspective looks to be challenging for occupancies and asset trades. The increased push by smaller developers to monetize their commercial office stock has moved up the cap rates even as leases are increasingly being renegotiated or concessions are increasing. The recovery curve for commercial office assets has been further pushed to 2022 due to current situation and will continue to put pressure on the cap rates.
Retail sector assets have already seen huge impact in terms of fall of rent, higher vacancies and increasingly changing buying behaviour that has transitioned to online space. There has been no movement on demand for retail assets keeping the rentals low and the cap rates continue to remain flat across India. The continued restrictions on use of organised retail spaces will impact the yields and their intrinsic value.”
Media Contact:
Sukanya Dasgupta
Associate Director & Head, India Marketing & Communications
[email protected]
+91 9811867682/ 8826377335
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