Direct commercial real estate investment in Asia Pacific exceeded market expectations in the first half of 2013, reaching US$59.7 billion, 21% up on the first half of 2012, according to research by Jones Lang LaSalle.
The growth was predominantly driven by the region’s largest markets, with Japan, Australia and China all experiencing strong deal flow throughout the quarter.
In Japan, investor confidence has been boosted by improving macro-economic indicators following government stimulatory measures. Acquisitions have been dominated by J-REITs where inclusion in the Bank of Japan’s asset purchase programme supported improved unit prices over the first half of the year.
The market was also boosted by increased public offering activity in the second quarter at around $10.2 billion, up 78% on the same quarter last year. Over the first half of 2013, volumes reached $20.8 billion, 50% higher than the first half of 2012.
In Australia, continued demand from both offshore and domestic institutional investors and pension funds lifted transaction volumes to $10.5 billion in the first half of 2013, up 27% from the first half of last year. Transaction growth in local currency terms was even higher because the Australian dollar depreciated against the US dollar by 13% from the 2013 high.
Megan Walters, head of research for Asia Pacific capital markets at Jones Lang LaSalle, said capital from around the region continues to show a bias towards core assets, though there is some evidence of a shift towards more opportunistic investment.
Stuart Crow, head of Asia Pacific capital markets at Jones Lang LaSalle, said there were increased allocations to direct real estate by large global sovereign and pension fund investors.
“Large US, Canadian and Middle Eastern investors have returned to the region and, together with active Asian high net worth and pension funds, are creating strong demand for assets across the region,” he said.
He said Japan and Australia, remain particularly active and, given a robust pipeline for the remainder of 2013. The company will maintain its forecast for transaction volumes to reach $110 billion by the end of 2013, which is slightly below the record of $120 billion in 2007.
Investment activity in other Asia Pacific markets was mixed as government cooling measures in Singapore and Hong Kong took effect. While quarter on quarter volumes were down in a number of markets across the region, overall growth over the half year was positive compared to the first half of 2012, maintaining a positive outlook for the remainder of 2013.
For Thailand, a smaller commercial real estate investment market, transaction volumes grew more than 95% in the first half of 2013, compared to the same period in 2012. The majority of transactions concentrated in the hotel sector, reflecting increased availability of hotel assets available for sale and strong investor interest in Thailand’s key hotel markets, particularly Phuket and Bangkok.