Investment committees once again see value in real estate, but the argument for allocating capital into the asset class still has to be made, as bifurcation and shifting megatrends complicate the landscape.

Up until around the middle of 2024, a certain thesis within real estate investment circles held sway. It went something like this: Once the era defined by inflated valuations and investment strategies reliant on cheap capital and liquidity blew up in 2022, institutional investment committees took a large step back from real estate allocations. Having already been spooked by the seismic shock that lockdowns had delivered to office markets, they were now dealing with financing costs that were making deals prohibitive, while fixed-income investments of every stripe were riding a wave of central bank tightening. Compounding this was the illiquidity of real estate, which inevitably comes to the fore in tough times and causes significant frustration. But this theory is now being consigned to the history books.

Despite the Sino elephant in the room, the outlook for Asia Pacific property markets is largely positive, thanks to generally cooling global interest rates and the ongoing, if grinding, international economic recovery from the pandemic era.