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February 11, 2014

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Asia-Pacific commercial real estate has strongest year

By Cherry Cao | February 11, 2014, Tuesday | Print Edition

The past year was the strongest on record for commercial real estate markets in the Asia Pacific region with direct investment exceeding US$126 billion, according to a recent report by Jones Lang LaSalle.

Transaction volumes over the 12-month period rose 29 percent from 2012 to US$126.7 billion, surpassing the previous record of US$120.5 billion in 2007. The growth was mainly driven by the region’s core markets of Japan, China, Australia and Singapore as investor sentiment was lifted by ongoing improvements in both debt and equity markets.

“2013 proved to be an outstanding year for Asia Pacific commercial property markets, with unrelenting demand prevailing in spite of macro concerns around China’s growth outlook, stability in the EU, and the US government’s fiscal strategy,” said Stuart Crow, head of Asia Pacific capital markets at Jones Lang LaSalle. “As the market gains further clarity on these issues, we expect a more stable growth outlook which should lead to activity in 2014 surpassing that of 2013.”

Regionwide, the resurgent Japanese market was a major contributor to the growth last year, up 69 percent from 2012, re-establishing its position as the third most active market globally by transaction volume after the US and UK. Record levels of investment were also reached in China, Australia and Singapore, up 71 percent, 33 percent and 40 percent year-on-year, respectively.

Country focus

Japan continued to create headlines, with transactions volumes reaching US$12.2 billion in the last quarter of 2013, bringing the full year total to US$41.7 billion, a surge of 69 percent from 2012. In local currency terms, the growth is even more remarkable with yen volumes doubling that of 2012. Portfolio deals accounted for the majority of transactions in the final quarter with retail assets comprising 46 percent of deals. Despite competition from a liquid domestic market, interest from foreign investors remained high, although foreign groups still accounted for more disposals than acquisitions through the year. With the market performing well, renewed confidence and improving liquidity, 2014 could see a number of legacy assets come to the market as landlords take advantage of improved conditions.

Investment activity in China’s mainland also set new records on both a quarterly and yearly basis with transaction volumes reaching US$8.5 billion in the last three months of 2013 and US$25.1 billion for the whole year, which represented a hike of 71 percent from 2012. Office assets accounted for the majority, or 80 percent, of deal flow. As China’s structural investment growth continues, it has confirmed its place as the region’s second-largest market by transaction volumes.

Increasing demand from both foreign and domestic investors led to strong growth in the Australian market with transaction volumes reaching US$6.4 billion in the fourth quarter of 2013, up 62 percent from same period a year earlier. Full year volumes set a new record at US$21.9 billion, a rise of 33 percent from 2012. Development activity and the subsequent fund-through deal flow has been a major contributor to investment volume growth in 2013. Foreign listed REITs have also become more active in the market toward the latter part of the year with a number of deals executed during the final quarter.

In Singapore, investment has risen, registering US$3.3 billion in the final quarter of 2013 and setting another record full year figure of US$11.8 billion, up 40 percent annually. Volumes in the middle and lower segments of the market were suppressed with overall volumes supported by a few very large deals and REIT IPOs.

 

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