Cap rates will stay low in 2020, supported by the low interest rate environment and ample investment liquidity. Room for further compression is thin and limited to some markets driven by capital flows.
Despite the U.S. and China signing a “Phase One” trade deal in January, downside economic risks in Asia Pacific are rising due to the coronavirus outbreak. Cap rates in Greater China are expected to expand due to greater leasing risk and the weaker economic outlook in H1 2020.
The coronavirus outbreak is set to hit investment sentiment in the short term and prompt investors to delay their investment decisions. Nevertheless, investment appetite remains strong and will lend support to regional investment volume in 2020.