Hong Kong, Singapore and South Korea were among the top ten buyers of global real estate
Based on new data from global real estate consultancy JLL reveals that Asia Pacific commercial real estate transaction volumes in the third quarter of 2019 have reached a record, bringing the year-to-date activity to a new high of $128 billion.
Transaction volumes for the period July to September climbed 18 per cent year-on-year to $42 billion, representing the best third-quarter performance on record, according to JLL's most recent Global Capital Flows report. This represents a 10 per cent increase in volume versus 2018. Asia Pacific's performance in the first three quarters of the year is significantly better than the global average transaction volume growth of 1 per cent.
"Investors in Asia Pacific are seeing past current headwinds such as slowing growth and trade tensions," says Stuart Crow, CEO, Asia Pacific Capital Markets, JLL. "Liquidity has strengthened in markets such as Seoul, Tokyo and Singapore, where occupier fundamentals remain solid. We are expecting Asian investors to further diversify their real estate holdings within the region and globally in the months ahead as they seek higher yields."
Among Asia Pacific cities, Seoul is the most liquid with $15.4 billion worth of real estate transacted in the first three quarters of the year.
Shanghai and Singapore stand out
Driving the increase in transaction volumes in the region is China, where activity remains elevated thanks to the vigorous start to the year. Regional growth has also been supported by the robust recovery in Singapore, where year-to-date activity now stands at an all-time high, says the report.
Investment into Shanghai reached $14.4 billion year-to-date with $3.5 billion received in the third quarter. The Chinese city was the largest recipient of cross-border investments among Asia Pacific cities in the first three quarters of the year, followed by Singapore and Sydney. Globally, it ranked third after Paris and London.
Meanwhile Singapore's office real estate sector was one of the strongest in the world with volumes rising by over 175 per cent year-on-year due to strong rental growth and net absorption. Deal volume in the city-state reached an all-time high, supported by Allianz and Gaw Capital's US$1.15 billion acquisition of Duo Tower in July.
As the third-largest recipient of cross-border investment in Asia Pacific, Sydney has logged several large-scale transactions so far this year. The biggest was Blackstone's $1.1 billion acquisition of a portfolio of office assets from Scentre Group during the second quarter. The third quarter saw foreign investment into Sydney coming primarily from Canadian pension funds and Singaporean groups. Year-to-date cross-border capital inflows to Sydney are 88 per cent higher than the same period last year, with $3.5 billion invested by foreign investors.
Asian buyers have been active overseas
Asia Pacific markets were also among the biggest capital sources for cross-border investments in the first nine months of this year, with Singapore, South Korea, and Hong Kong making it to the top-ten list of capital exporters.
"Asian investors are spreading their capital more broadly and are looking at markets such as continental Europe where debt costs are low, assets are available and markets such as Germany and France are seen to be beneficiaries post-Brexit," says Mr. Crow.
"Asia Pacific's real estate market is likely to hold steady as investors continue to allocate vast amounts of capital to commercial real estate in their search for yield without exposure to excessive risk."
JLL expects Asia Pacific's 2019 commercial real estate investments to grow 13 per cent year-on-year, indicating further acceleration in the fourth quarter of 2019.