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Asia Pacific Capital Markets Outlook 2018

​In the medium-term, unlevered total returns are forecasted to be below that of the preceding three years as we near the end of a yield compression cycle and development activity remains abundant. Much of the new core capital is making its way into the market directly via sovereign wealth funds/pension funds as well as via new REIT vehicles, open-ended funds, joint venture structures and insurance companies. Opportunistic remains the main strategy, however, a larger share of capital raised is being allocated towards other strategies, in particular value add. Investors have been recalibrating their strategies and looking at the alternatives sectors and the more niche asset enhancement/conversion plays. A clear shift from CBD to non-CBD markets has also been observed through a number of the larger markets in Asia Pacific as investors seek out available opportunities and higher yields. The overall share of office transaction volumes in the eight core CBDs fell to its lowest level on record as a noticeable shift into new markets has been observed. REITs are likely to be targeted more in 2018, particularly those with underperforming management.

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