Asia Property Investment on Record Pace

Asia Property Investment on Record Pace

Commercial News » Asia Pacific Commercial News Edition | By Francys Vallecillo | October 21, 2013 10:18 AM ET

Direct investment into commercial property in Asia Pacific increased 33 percent during the third quarter from a year earlier, as the region remains on track to record the strongest year of transaction volumes on record.

Direct commercial property investment in Asia Pacific reached $30 billion during the third quarter, marking the third consecutive quarterly increase for the region, according to a capital markets report from Jones Lang LaSalle. Investment activity for the year reached $89.6 billion at the end of the third quarter, showing a 25 percent increase from the same period last year.

"Following yet another quarter where growth has exceeded expectations, we have revised our year-end forecast from $110 billion to $120 billion," Stuart Crow, head of Asia Pacific capital markets for JLL, said in the report. "If this figure is reached, it will put 2013 on a par with 2007 as the strongest year ever by transaction volumes."

The largest markets in the region -- Japan, China and Australia -- accounted for 69 percent of the year's completed transactions in the region, leading the growth in commercial investments. 

Japan witnessed a 139 percent year-on-year increase in commercial real estate investments during the third quarter, reaching $8.7 billion. China also showed significant growth in investment activity during the third quarter, reaching $7 billion and growing 167 percent from last year. 

Transaction volumes in China totaled $16.6 billion year-to-date, as interest among offshore investors remains strong, the firm reports. 

Despite the healthy growth in commercial property investments, the region is showing effects from global markets.  

"Although transaction volumes have surged over the first three quarters of this year, as predicted, we are starting to experience caution over interest rates after the Federal Reserve's recent announcement to slow its asset purchase program," said Dr Megan Walters, head of research for JLL's Asia Pacific capital markets. "Longer dated bond yields across the region have moved higher, highlighting concerns around the direction of global rates and prompting investors to underwrite interest rate rises in their acquisition due diligence." 

Investment activity decreased 76 percent in Hong Kong during the third quarter compared to last year, as the market deals with government cooling measures and interest rate concerns. Consequently, almost $2 billion of Honk Kong-based capital was invested in other markets around the region during the third quarter, according to JLL. 

The firm remains confident in the region's performance during the remaining months of the year, given the strong pipeline and growing investor sentiment.

"The Asia Pacific commercial property markets continue to outperform on the back of unrelenting demand for exposure to direct real estate returns in the region," Mr. Crow said. "We are seeing increased activity from Asian Pension and Sovereign Funds, together with new sources of global capital that are allocating to Asian Real Estate for the first time." 

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