Shrinking Supply Delivery Fuels Stronger CRE Performance

Our newly expanded Real Estate Economics Service now covers 100 cities, 11 of which are in Asia-Pacific, across five major property sectors: office, retail, industrial, residential, and hotels. It includes a novel approach to estimating past and future building stock, utilising cutting-edge geospatial analytics, machine learning/AI, and big data. Commercial real estate development pipelines across Asia-Pacific are contracting structurally as higher construction costs, tighter financing conditions, regulatory delays, and labour shortages have undermined feasibility. The result is fewer project starts, lower land acquisitions, and a materially thinner forward supply outlook. Falling supply over the next two-three years is creating a window for operating fundamentals to improve. Vacancy rates are expected to decline and rental growth will re-emerge in offices, hotels, and select residential markets, particularly where vacancy is currently elevated. Supply is mainly being delivered where fundamentals are strongest. Meanwhile, development is retreating in markets with weaker demand or demographic headwinds, reinforcing divergence in performance across cities and sectors. The cycle has shifted toward an income-led environment in which existing assets benefit from supply discipline, industrial markets become balanced after rapid expansion, and long-term outcomes are driven by demographics, labour market trends, and capital costs rather than short-term stimulus.