KUALA LUMPUR (June 22): As lockdowns in most countries in Asia-Pacific come to an end, commercial real estate investors are gradually shifting from asset management and rental abatement to planning market re-entry, according to CBRE’s Capital Market Viewpoint report titled “New buying opportunities whet investor appetite”.

However, the real estate landscape has been transformed within such a short period due to the Covid-19 pandemic, upending real estate market fundamentals, the acceleration of a number of major structural shifts and the region’s first recession in 40 years. This will require investors to adopt very different strategies. 

CBRE has already detected strong buyer preference for high-quality assets, core investments and more stringent due diligence as investors look to generate stable and reliable cash flows.

The majority of the respondents of CBRE’s latest Asia-Pacific Cap Rate Flash survey expected investment enquiries to return to normal in the next three to six months, indicating a gradual increase in the number of transactions in the coming quarters. 

“Although investors will tread cautiously and investment volume is unlikely to return to pre-pandemic levels until mid-2021, there is still ample liquidity in the market, led by Asia-Pacific-focused closed-ended private equity real estate funds, insurance companies, pension funds and high-net-worth investors,” said CBRE.

As prices become more attractive and valuations are updated, CBRE expects institutional buyers to explore secondary trading opportunities for closed-ended funds. Despite the travel restrictions, some groups can still complete cross-border deals. 

“While a mismatch in pricing expectations may inhibit some deals, we expect to see an increase in willing sellers in 2H20 (the second half of 2020), driven by liquidity needs, fund expiration and redemption pressure.

“With the pandemic expected to have an enduring impact on working and purchasing behaviour – leading to increased prominence of specific asset classes – investors will need to be particularly mindful of how occupiers will use space in the future and how this will impact demand,” opined CBRE.