Asia Pacific Markets Dominate Global Commercial Capital Flows in 3Q

Asia Pacific Markets Dominate Global Commercial Capital Flows in 3Q

Commercial News » Commercial Real Estate Edition | By Michael Gerrity | December 1, 2011 10:10 AM ET

According to Jones Lang LaSalle's latest Global Capital Flows Report for the third quarter of 2011, four out of the top ten most traded direct real estate city markets globally in the third quarter of this year were in Asia Pacific. Hong Kong, Tokyo, Shanghai and Sydney and all made the top ten, compared to four cities in the Americas and two in Europe.

The most notable quarter on quarter change in the top ten has been Tokyo's resumption of activity following the earthquake. The city took the number four spot with US$3.6 billion traded, up from US$0.9 billion in the second quarter of the year. Sydney was a new entry into the top ten this quarter taking the number eight spot (US$1.6 billion), Shanghai stayed fairly constant with US$1.9 billion traded (though moved up to rank fourth from eighth) whilst Hong Kong moved up to third place from four last quarter with US$4.2 billion traded (over half of this total was accounted for by the Festival Walk transaction).

Direct real estate investment transaction volumes in Asia Pacific held firm in the third quarter at US$21.3 billion, up 13 percent on the previous quarter and up 7 percent on the same period in 2010. In the first nine months of 2011 net capital flows into Asia Pacific were US$4.6 billion.

Alistair Meadows, Director, International Capital Group of Jones Lang LaSalle Asia Pacific tells the World Property Channel, "There are two strong themes we see emerging from investors; firstly Asia Pacific has remained an attractive destination for international capital from other regions; economic growth in the region, although slowing, remains stronger than the Euro-zone and the United States. We believe this relative attractiveness, both in terms of the region's economies and its real estate markets, will remain over the coming months. Secondly, Asia Pacific remains a key source of capital that is looking for opportunities to invest globally. Whilst caution has affected investor sentiment due to the Euro-zone debt crisis, we expect equity-rich high net worth individuals in Asia to continue to seek safe investment havens such as London and New York."

Singapore was the third largest source of cross border capital (after global funds and the United States) and was the most active purchaser globally in net terms. The largest net divestors were the global funds and Hong Kong investors at -$2.7 billion apiece. Both Singapore and Hong Kong's positions were dominated by Swire Properties' disposal of Festival Walk to Mapletree Investments for US$2.4 billion.

While the listed Real Estate Investment Trusts (REITs) were net acquirers in all regions, they were primarily active in the Americas and Europe, while in Asia Pacific they surrendered top spot to institutions. In addition, Corporates were large net acquirers in Asia Pacific (US$1.4 billion), unlike the other regions. Owner occupation is more attractive to lock-in costs or acquire suitable space, while in the other regions sale and leaseback remains a more attractive option.

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