However, transaction volumes in Australia improved 17% in the third quarter of 2012 and markets in China, Hong Kong and Japan are described as very activie.
Jones Lang LaSalle’s latest Global Capital Markets Research also shows that direct investment in commercial real estate was US$22.4 billion. This compares to US$26 billion in the second quarter and is in line with the third quarter of 2011 when US$23 billion was transacted.
Globally there was US$100 billion of direct investment in commercial real estate in the third quarter of 2012, a dip of around 6 to 7% comparewd with the same period in 2011.
Stuart Crow, head of Asia Pacific Capital Markets, Jones Lang LaSalle, said that large global sovereign and pension funds are returning their focus to Asia Pacific.
‘We maintain our expectation for full year 2012 volumes in Asia Pacific to reach US$88 billion, compared with US$98 billion in 2011,’ he added.
Cross border purchasers accounted for US$3.7 billion of transactions during the quarter in Asia Pacific, or 16% of total investment in the region. Of this cross border investment, US$2.3 billion came from purchasers outside of Asia Pacific.
This was buoyed by a large investment of US$1.04 billion from the Canadian Pension Plan Investment Board (CPPIB) into the Barangaroo mixed use project in Sydney.
There has been a slowdown in investment activity into Asia Pacific from European investors. Capital outflows by European investors have exceeded their capital inflows into Asia Pacific so far this year.
There were four Asia Pacific cities in the top ten largest recipient cities globally of cross border investment year to date: Sydney, Hong Kong, Tokyo and Shanghai. Whilst Sydney and Tokyo have seen more investment this year to date compared to last year, the volume of cross border capital that flowed into Hong Kong and Shanghai fell. There were three Asia Pacific countries in the top ten cross border purchasers year to date, Singapore, Malaysia and China.
Alistair Meadows, director of the International Capital Group Asia Pacific at Jones Lang LaSalle said that activity between regions continues to be characterised by larger lot sizes involving pension and sovereign wealth funds that are active globally for the first time due to the relaxation of restrictions on cross border investment.
‘Asian local buyers are taking up the deals being exited by Europeans and Asian capital continues to flow out of the region looking for core assets in key gateway cities globally. Asian funds continue to like buying in London in particular,’ he explained.
Stand out deals in the third quarter included Korea Life purchasing an office asset in the City of London, a consortium involving Stanhope backed by the Alberta Investment Management Corporation (AIMCO) and Mitsui Fudosan buying the BBC Television Centre in London as a redevelopment opportunity, whilst Malaysia’s KWAP and a consortium of South Koreans both recently purchased office buildings for £200 million and £150 million respectively.
