Expect a historically slow and weak recovery in this cycle
We expect the upturn in both investment activity and capital values will be weaker than in any previous cycle, predominantly due to risk-free rates staying elevated at “new normal” levels in the coming years. Within that relatively anaemic outlook, Japan and Australia provide the best rental growth outlooks at the all-property level, and it is Australia where total returns look most attractive at around 7% p.a. over 2025-29.. Meanwhile, the poorest performer will be Hong Kong, where ongoing structural growth challenges will continue to hinder activity until property yields climb by around 50bps from current levels. At the sector level, the primary risk in the region lies in the industrial sector, where high vacancy rates in some markets and stretched valuations suggest industrial yields will rise relatively quickly.
