In terms of a sector snapshot, supply is struggling to keep up with rapidly rising demand for data-centre capacity, thereby boosting prospects of attractive net operating income growth over time, and investors remain increasingly keen on the sector — especially as they roll out digital strategies that focus on digital assets and infrastructure with a view to future-proofing their portfolios.
The worst of the Covid-19 pandemic has passed, but its effects on the global economy and real estate markets continue as legacies of supply chain disruptions and inflationary pressures interact with a fresh source of geopolitical tensions and uncertainty. Volatility is elevated, but recent performance in the face of a turbulent economy suggests real estate markets in Asia Pacific are well-positioned to weather whatever comes next.
In the past year, inflation forecasts have been consistently revised upwards, although conditions are not unprecedented and do not spell disaster for property values, as rents tend to keep pace with inflation over time. With real estate yields at historical lows, constructing a real estate portfolio that can deliver consistent net operating income growth will be crucial to mitigating the risks associated with a transition towards a higher interest rate environment.
