A survey by an international realtor agency has discovered that 78% of investors named pricing uncertainty as the biggest challenge to their capital deployment ambitions in 2023.
Further, 70% believed that uneven and unpredictable global interest rate policies would impact their investment decisions.
The findings were announced by realtor firm JLL, which conducted the Asia Pacific Investor Sentiment Barometer 2023 survey.
The firm also pointed out that the results saw a shift from early 2022, when 82% of investors polled by JLL named competition for assets their biggest capital deployment challenge. This is compared to 9% in 2023.
Despite the hesitation over investment due to pricing and interest rate uncertainties, the survey discovered that these respondents were in fact optimistic in the long term. They cited “central bank policy […] prompting a pause rather than a retreat from investment activity” as the main reason.
According to JLL analysis, 58% of respondents believed that benchmark rates would first need to adjust down 50 to 100 bps before investment activity picks up. As a result, approximately 60% of investors polled expected volumes to decline further in 2023 from the low base of USD129 billion deployed into Asia Pacific real estate in 2022, aligning with JLL’s forecast of a modest 5 to 10% decrease published in its Asia Pacific Outlook 2023.
JLL also found out that in response, investors are rethinking their strategies and risk tolerance levels in 2023. Value-add strategies are in greater focus for 64% of respondents, up from 53% in last year’s survey, including deployment of capital to upgrade and comply with sustainability targets in core markets, and to repurpose hotel assets as multifamily projects considering supportive positive market demographics including residential shortages.
When executing strategies, investors pinpointed direct investments and debt as the two most-favored methods for deploying capital in 2023, with 48% and 39% of respondents increasing their focus on these options respectively.
Respondents cited interest in direct investments, due to limited joint venture and platform opportunities, and the higher potential returns on debt resulting from rising rates pushing these capital strategies regionally.
Discussing its methodologies, the international realtor agency said that it surveyed leaders from global and regional investors on their investment intentions, strategies and general outlook in 2023. Half of the survey respondents identified themselves as real estate and/or private equity investment managers, representing some of the world’s largest real estate investors and asset managers, while others were investors with diversified portfolios. North America and Europe are their main sources of capital.
