According to global real estate advisor JLL, Asia Pacific commercial real estate investment volumes continued to rebound strongly in the first nine months of 2021, up 30% compared to the same period in 2020.
Asia Pacific direct real estate transactions year-to-date reached $125 billion, just 6% below 2019 levels as investors deployed capital into more income-resilient assets, such as office and logistics sectors.
Analysis in JLL's Capital Tracker Q3 2021 showed that third quarter investment in Asia Pacific was $39.5 billion, a 10% increase year-on-year. However, transactions were down by 23% quarter-on-quarter as several regional economies were impacted by the resurgence of Covid-19 and subsequent restrictions limiting activity.
"Despite ongoing unpredictability, our interactions with clients reaffirm both the attractiveness and resilience of the Asia Pacific commercial real estate sector. Throughout 2021, investor interest in the region has remained extremely high as capital becomes more active and volumes approach pre-pandemic levels across the region, which we expect will continue into the fourth quarter," says Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL.
In the third quarter of 2021, office investments continued to recover, making up 55% of deals, supported by stabilizing rents and occupancy levels. In tandem, logistics transactions continue to climb, with investments in the past 12 months reaching $43 billion, compared to $25 billion in 2019. JLL forecasts logistics investments to double to $50-60 billion between 2023-25, driven by favourable demand drivers, attractive yield spreads and a desire for diversification.
Retail and hotel investments have been soft as economic recoveries across the region were delayed due to Covid-19 outbreaks. Hotel investment volumes are set to cross $7 billion for the full year 2021, growing to $9 billion in 2022, JLL estimates.
By geography, activities in Australia doubled year-on-year, due to large industrial and office sales, recording over $6.3 billion in direct investments for the quarter. Japan at $11.8 billion (up 51% year-on-year) and South Korea at $7 billion (up 1% year-on-year) were supported by activity from domestic REITs and investment managers. In contrast, investment activities in China ended the quarter at approximately $7.3 billion (16% down year-on-year), while Singapore dropped to $1.1 billion dollars (64% down year-on-year) as sentiment was dampened by Covid-19 restrictions.
"We expect portfolio reallocation to remain a major theme into 2022 with investors facing stiff competition for income-resilient assets including office and logistics, as well as in more niche sectors such as self-storage, residential and data centres. Overall, investor sentiment remains positive and we maintain our view that investment volumes will rise 15 to 20% in 2021 with further recovery expected in 2022," says Regina Lim, Head of Capital Markets Research, Asia Pacific, JLL.