Asia Cross-Border Commercial Investment Surges, Japan Top Market
According to CBRE, cross-border real estate investment surge 125% quarter-on-quarter in Q4, 2014 to US$10.2 billion. Overall investment momentum remained strong with a total turnover of US$30.8 billion. The surge of cross-border investment turnover--US$10.2 billion--was a result of strong investment activity by institutional investors and newly-raised property funds. The office sector remained the main focus for investors.
On a country basis, Japan and Australia remained upbeat, emerging as the top market in the region for total investment volume. Meanwhile, strong growth was also recorded in New Zealand due to an increase in institutional acquisitions, and in China, driven by softer asking prices. South Korea saw the most significant decrease quarter-on-quarter, but this was due to the distorting effects of the previous quarter's largest-ever commercial real estate transaction in Asia Pacific--a US$10 billion acquisition of the KEPCO headquarters in Seoul by Hyundai Motor Company and KIA Motors.
CBRE Asia Pacific's Head of Research Dr. Henry Chin commented, "As 2014 came to a close, investment in the region remained robust, with the main focus for investors being the office sector. However, we're seeing opportunistic investors increasingly shifting focus to other sectors offering more attractive yields, such as residential and hospitality. To highlight a couple of markets, we saw investment in China and India progress, mainly due to an improvement in economic growth in the two countries, including liberalizing interest rates in the former, and more measures being put in place by the government to boost FDIs in the latter.
In 2015, we are expecting to see another solid performance for investment activities in APAC, driven by strong investor appetite and adequate debt financing. Continued economic growth, alongside favorable demographic and wealth factors, will continue to drive APAC's real estate fundamentals, while the recent steep decline in energy prices has reduced the pressure for short-term interest rate hikes, further supporting the regional real estate market."
Total investment volume in Asia Pacific by market: Other key highlights include:
- Logistics continued to be a hot sector--new logistics supply in Asia Pacific in 2015 is expected to be 50% higher than the five-year historical average, due to developers responding to strong occupier demand. Q4 saw strong demand in China, Hong Kong, Japan and South Korea, driven by 3PL, e-commerce and automotive firms.
- Meanwhile, office markets in the region tightened further in Q4 amid limited new supply and the highest quarterly net absorption figure of the year. The quarter recorded 10.5 million sq. ft. of office demand with the overall annual demand having increased 29% year-to-year to 38 million sq. ft.
- Office new completion slipped below the five-year average to just 36 million sq. ft. while office rental growth slowed despite the strong fundamentals.
- Tech firms--especially e-commerce--remain active in the office sector whilst non-banking financial services companies are also expanding in Asia. Falling oil prices have negatively impacted large office requirements from the oil and gas sector in Kuala Lumpur whilst several Australian markets continue to suffer from the contraction of the resources and downstream engineering sectors.