TOKYO: The latest Emerging Trends in Real Estate Global Outlook compiled by PwC and the Urban Land Institute (ULI) reveals that property investors in the Asia Pacific (Apac) region are increasingly concerned about low yields and stalling transaction volumes.
According to the report, released on March 12, low yields and sluggish transaction volumes were among the top concerns for property investors in Apac this year. The report is based on a survey of global asset managers, including Blackstone, Savills Investment Management, and CBRE Investment Management.
Over 70% of respondents highlighted low yields, persistently high interest rates, and geopolitical tensions as their top concerns. Despite these challenges, many industry leaders still view Apac as an attractive investment option due to its growing population and favorable demographic trends. Additionally, the region’s divergent monetary policies, such as Japan’s commitment to raising short-term interest rates, make it an appealing diversification strategy for investors.
In 2024, real estate transactions in Apac grew by 13% year-on-year, reaching US$173.5 billion ($231.3 billion), outpacing the growth of other regions such as Europe, the Middle East, and Africa (EMEA) at 12% and the Americas at 11%. However, as Europe and North America begin a new capital markets cycle with transaction volumes set to improve, Apac is expected to experience sluggish transaction volumes.
Last year, the declining transaction volume in Apac was impacted by a drop in liquidity. In China, transactions decreased by 25% year-on-year to US$418.3 billion ($557.6 billion), while Hong Kong SAR saw a 1% decline to US$15.7 billion ($20.9 billion).
Meanwhile, investors in Europe face a different set of concerns. The top three areas of concern for asset managers in the region were international political instability (85%), further escalation of the war in the region (83%), and Europe’s economic growth (77%).
Data from MSCI, a leading US-based research and data analytics company, shows that US commercial property prices stabilized in 2024, with only a 0.7% decline for the year. As a result, investors may shift their focus and capital to other regions in the upcoming months.
The report also revealed that data center assets were the top choice for investment and development prospects in all three regions in 2025. According to New York-based research firm Green Street, there was record demand for data centers globally last year, with asking rents increasing at a double-digit pace. MSCI’s latest research indicates that 2024 will be a standout year for this asset class, with acquisitions of existing data centers through single-property and portfolio deals increasing by over 60% in the US.
In September of last year, Blackstone and the Canada Pension Plan Investment Board (CPP) acquired data center company AirTrunk from Macquarie Asset Management and the Public Sector Pension Investment Board for over US$16 billion ($21.3 billion). This deal was the largest commercial real estate transaction in Apac and globally for 2024.