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APAC economic growth eased due to an export slump. Inflation seems to be under control and paves the way for rate pauses in 1H23. Yield spread is still tight and further cap rate expansions are expected in 2023. Japan’s policy risk has increased but the country still offers relative value.

Wai-Fai Kok, Head of Real Estate Research & Strategy – Asia Pacific

APAC GDP growth slowed to 3.2% YoY in 4Q22, largely driven by an export slump. Asian exports fell ca. 10% YoY during the quarter in the steepest decline since early-2020. External trade was on a tear during the pandemic period, as consumers channeled spending into goods amidst restriction on services. This trend turned on its head in mid-2022. While still elevated relative to 2019 levels, Asian exports reversed almost half of their gains in 2H22. We believe this weakness will likely continue driven by a continued normalization of face-to-face services spending, a turn in the semiconductor cycle, and moderation in global demand.