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Commercial Property Investment Volumes up 10% in Asia Pacific as Japan Rebounds
Direct commercial real estate Investment volumes in Asia Pacific have increased to around 10% year to date, according to 3Q flash reports from Jones Lang LaSalle. Preliminary figures released today suggest that volumes have now reached approximately USD 67 billion year to date compared to USD 61 billion for the same period last year.
The key country to watch was Japan where direct commercial investment volumes went back to over USD 4.7 billion- in line with the same quarter in 2010, as investors looked to see how the markets recovered following the tsunami and earthquake and the subsequent dramatic fall in volumes during the second quarter.
Japan’s volumes in 3Q11 showed a resurgence from the USD 1.5 billion reported in 2Q11 supported by BOJ’s program to spur the J-REIT market, leading to significant buying activity by J-REITs. The resumption of this market is likely to support renewed international investor interest in the biggest market in Asia Pacific. The IMF’s outlook for Japan next year is for growth of 2.3% based on reconstruction work following the disaster.
In China, Shanghai was a top location with the city being home to six out of the top ten biggest deals, four offices, one retail and a hotel. The deal volume for China’s direct commercial property investments rose to approximately USD 2.8 billion, up 13% y-o-y. The landmark deal this quarter was Hong Kong’s Festival Walk retail deal, which was sold by Swire Properties to Mapletree Investments for USD 2.4 billion. This is the largest deal by far involving a single built asset since 2007, and the largest in Hong Kong’s history. The market was active in South Korea with approximately USD 1.8 billion of deals recorded, double the volumes in the same quarter last year with REITs actively buying Seoul office stock.
In Australia, volumes stood at the USD 3 billion mark, back to more usual transactional levels following the surge of overseas cash into the market last quarter which pushed volumes up to USD 4 billion. Rounding up the markets, in Singapore total volumes were at USD 1.2 billion made up of plenty of smaller sub USD100 million deals, with industrial being an active sector.
On the back of increased investment volumes in 3Q11, most major markets saw either stable or increasing capital values. Across the region, the average quarterly increase in capital values was 2.6%, slightly higher than the 2.4% recorded in 2Q11. Capital values in Jakarta and Beijing recorded the largest q-o-q increases of 14.2% and 11.8%, respectively, largely in tandem with rental growth. Sydney, Perth and Manila followed with quarterly increases of 4.0-6.5%. Growth in capital values in Hong Kong and Singapore slowed further to between 0.8% and 2.1%, as investors became more cautious.
Stuart Crow, Head of Asia Pacific Capital Markets said, “growing uncertainty on the global economy is placing downward pressure on capital values across some core markets in Asia Pacific. Many investors are shifting their attention to the less volatile office markets such as Australia and Japan, which is likely to continue to benefit from a flight to safety in the next 12 months, with investors attracted to the higher yield environment. There remains a solid interest in China Tier 1 Cities from domestic and international investors alike.”