INTRODUCTION Contributed by: John Sullivan and Matt Alshouse, DLA Piper LLP
sector, but have diverged significantly. At the end of 2024, according to Nuveen, nearly 14% of US office space was unoccupied, compared with just over half that in MOB’s. In part, hybrid and work-from-home practices, which have lin - gered and become semi-permanent features of the American employment landscape, are to blame for the continued weakness in the office sector. Not so in Asia. As noted above and in previous editions of this guide, the Asian office market has shown a resiliency lacking in Western markets, due to greater continuity in traditional working and occupancy expectations from employers. Asian development has also diverged from that of the rest of the world, as demographics (read: shrinking populations) have not led to the same acute demand for senior and student housing that has spurred investment in Europe and the Americas. Instead, as noted above, office uptake has remained strong through the struggles of the pandemic and its aftermath, and is expected to continue to attract a higher share of investor funding. 2025 outlook: high hopes, now tempered As we entered 2025, there was a widespread consensus among market watchers and indus - try analysts that the upward trajectories seen in the latter stages of 2024 would continue, if not accelerate. With approximately USD600 billion of dry powder allocated for real estate at the end of last year, this was not a surprise. A Deloitte survey of commercial real estate holders showed that nearly nine in ten respondents expected increased revenue from property allocations this year, a remarkable turnaround from just a year prior, when six in ten anticipated losses. This sunnier outlook was also based on solid GDP growth throughout most of the globe, and pre - dictions of more interest rate cuts as economies
stabilised. It is worth noting that, even with cen - tral bank monetary easing beginning in earnest last year, kick-starting the markets, only about 20% of the prior two years’ rate increases have been reversed to date globally. Investors see a present landscape with more attractive debt pricing, but also a future with even lower borrow - ing costs as there is more than adequate room for continued central bank rate cuts. This gives investors the ability to see values increasing in coming years, rather than a future of struggling to refinance properties or sell to buyers who can - not make pricing models work due to the high cost of debt. In the aggregate, Savills projected toward the end of last year that global real estate invest - ment would eclipse USD950 billion this year, a substantial increase over 2024 (which, of course, saw significantly more activity than 2023). Regionally, CBRE’s APAC market outlook for this year included an investment volume increase of 5-10%, resulting from growth centred in the Korean, Australian and Singaporean markets, and to a lesser degree, Japan and India. Its regional investor intent survey indicated that continued interest rate cuts and better asset prices had more than doubled net purchasing intentions from a year prior, with steady growth expected to be led by strong office lease uptake and improved retail rental activity. In Europe, there was widespread anticipation of continued growth in logistics space, with CBRE projecting that demand for sector space would be increasing by around 12.5% on average throughout the region, led by a short term need for over 20% more square footage than currently exists in Spain.
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