Real estate returns were mixed in 2013 across the Asia Pacific region. Leasing demand from the corporate sector was generally soft in the region even as capital flowed strongly into the market, especially from local investors and domestic REITs. New take-up was weak in China and Australia while Japan experienced a noticeable shift to the upside. Given more stability in the macro economy, we expect real estate returns to normalise in 2014 and 2015 but we remain concerned about the possibility of a gradual increase in the cap rate in certain markets and sectors. Acquisitions have become more challenging given recent cap rate compression in property markets especially for prime assets.
We maintain our favourable view for key core office markets and for the logistics sector while we have become more cautious in the highly cyclical markets. Our caution is based on rising cap rates and the competitive threat of e-commerce in the retail sector.
Source : Deutsche Asset & Wealth Management