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Home arrow News arrow Asia arrow Commercial real estate investment falls in Asia Pacific but set to pick up in 2013

Commercial real estate investment falls in Asia Pacific but set to pick up in 2013

Thursday, 31 January 2013
Direct investment into commercial real estate in Asia Pacific amounted to US%94.6 billion in 2012, down 4% from 2011, according to new research from Jones Lang LaSalle.

But growth is expected in 2013 with the firm forecasting that volumes in the Asia Pacific region could increase to US$110 billion this year which would an increase of 16%.

‘Investment levels in Asia Pacific in 2012 remained strong although slowed a little during the middle of the year due to the Euro debt crisis and US fiscal cliff concerns. Activity returned strongly towards the end of the year and we see this flowing into 2013,’ said Stuart Crow, head of Asia Pacific Capital Markets, Jones Lang LaSalle.

‘We are expecting to see higher transaction volumes this year driven largely by the strength of the listed real estate markets, the continued low interest rate environment and the very noticeable return of large global investors to the region. We see numerous new investors targeting the region and a fresh wave of groups who are looking to move higher up the risk curve,’ he explained.

Alistair Meadows, director of the firm’s International Capital Group Asia Pacific said that inflows into Europe continued to dominate the capital moving around the globe in 2012. ‘We saw net investment into Europe up 36%, which was due in part to an 80% increase from investors in Asia Pacific taking advantage of opportunities. These opportunities have been created by attractive assets coming onto the market as investors who bought in 2008 and 2009 are choosing to capitalise on value gains, as well as some distressed properties becoming available,’ he pointed out.

‘We expect Chinese offshore investment to become one of the major sources of new capital this year and beyond as insurance companies are now allowed to invest in overseas real estate, having not been able to previously,’ he added.

Major markets in 2012 delivered mixed results, with total volumes in China down 26% and down 8% in Singapore. Steady performances were recorded in Australia and Hong Kong, both up 2%, while Japan saw a 5% increase and South Korea an increase of 9%.

Cross border purchasers accounted for US$19.7 billion in 2012, equivalent to 21% of all acquisitions. Australia continued to lead the way in attracting foreign capital with US$6.5 billion through the year, followed by Japan with US$5.1 billion, China US$4.3 billion and Hong Kong US$1.8 billion. These four markets accounted for 80% of the regions cross border acquisitions throughout the year.

Singapore was the source of one third of all cross border capital deployed in the Asia Pacific region in 2012 with over US$6.5 billion in acquisitions. Other major sources of cross border capital include global investors at US$2.4 billion as well as groups from the US at US$2.3 billion, Canada US$1.9 billion and China US$1.65 billion.
In the fourth quarter of 2012 domestic investors dominated the investment sphere with cross border transactions accounting for just 23% of volumes. Over the full year, cross border transactions have accounted for 30% of the total. There were also a number of cross border investors on the sell side in the fourth quarter. In terms of purchasers, cross border purchasers made up 10% of acquisitions, short of the 20% recorded for the full year.

Also during the quarter, office assets were heavily traded relative to other asset classes. Office deals made up over 56% of total investment volumes, with retail falling slightly below its long term average to 18% of the total volumes.

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