Investment in 2022 reached $129 billion as interest rate hikes weighed on market sentiments
According to data by global real estate consultant JLL, commercial real estate investment in Asia Pacific in 2022 declined by 27% year-on-year as a tightening interest rate cycle and global macroeconomic uncertainties influenced decision-making. Direct investment in Asia Pacific commercial real estate totaled $129 billion for the full-year 2022, in line with the firm's projections.
The fourth quarter saw a 41% year-on-year decline in activity across Asia Pacific. However, the $30.7 billion in capital deployed between October and December represented a quarter-on-quarter increase of 12%, reinforcing JLL's conviction that the slowdown is likely to moderate in 2023.
"Investors reset short-term deployment strategies in 2022 but remain committed to the longer-term prospects of the Asia Pacific real estate market. Price discovery will continue to be a major theme for investors in 2023 and is poised to influence deployment strategies for the first half of the year as bid-ask spreads tighten. Encouragingly, factors including the reopening of China, an expected recovery in Japan, and the belief that Asia Pacific will be the least impacted region by any global economic slowdown, bodes well for a strong resumption of activity in the second half of 2023," says Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL.
Singapore emerged as the region's best-performing market in 2022 with total commercial real estate investments climbing by 53% year-on-year. Supported by robust first half office market activity and a sizable one-off retail portfolio transaction in December, Singapore drew $14.2 billion in direct investments. Hong Kong's attractiveness improved following the relaxation of Covid-19 curbs. However, with full-year investments of $7.7 billion, the market was down 24% year-on-year.
South Korea was the most active investment market in 2022 with $26.2 billion in transactions despite posting an 11% year-on-year decline. China, driven by a pickup in fourth quarter activity, attracted $24.8 billion, down 37% year-on-year. A solid rebound in the fourth quarter pushed volumes in Japan to $24.7 billion for the year, down 40% on 2021. Australia, grappling with a disconnect between buyer and seller expectations, saw a decline of 38% year-on-year for a total of $20.9 billion invested.
The hotel sector was Asia Pacific's best-performing asset class in 2022 compared to the prior year. Backed by the resumption of business travel and tourism, it attracted $10.1 billion in capital, up 7% year-on-year.
Office, which remained the region's most traded asset class, finished the year with $60.5 billion in investments, down 18.7% year-on-year as investors became more selective as the bifurcation between core and secondary assets continued to play out. Logistics and industrial transactions declined 46% year-on-year with $25.9 billion in capital deployed. Retail real estate volumes regionally were $23 billion for 2022, a year-on-year decline of 39%.
"Green shoots in the fourth quarter ensured that the challenging investment market ended 2022 on a more optimistic note, snapping a year of volume declines. We expect the bright spots of strong fundamentals in select office markets, value-add retail, and cyclical and opportunistic buying in the region's more mature markets to help drive deal flows in 2023," says Pamela Ambler, Head of Investor Intelligence, Asia Pacific, JLL.