Asia Pacific commercial real estate proving attractive for investors
With stock markets in a state of dislocation, by contrast real estate markets in Asia Pacific are continuing to function well with a succession of deals being completed by a range of investors, according to property consultants.
In the last few days brokers at Jones Lang LaSalle have acted for investors to complete three sizeable deals and have several more in the pipeline which are expected to complete in this quarter.
Real estate presents a good opportunity for investors to secure cash flows in the form of rents that have the potential to keep up with inflation. The biggest markets in Asia Pacific are China and Australia, and international investors are actively returning to Japan,’ said Megan Walters, head of research for Capital Markets at Jones Lang LaSalle in Asia Pacific.
‘This year the market for direct commercial real estate investment is estimated to be worth around a US$100 billion in Asia Pacific in terms of transaction volumes. Yields on prime office stock range from Tokyo 3.6% through to Shanghai 6.1% and Sydney 6.9%,’ she added.
In China around US$5 billion in commercial real estate investment deals were concluded last quarter. This week Jones Lang LaSalle has been involved in the completion of two deals including the purchase of a grade A office building in the Pudong area of Shanghai for US$94 million. Currently known as Jia Rui International Plaza, the building has a total saleable gross floor area of approximately 462,000 square feet, has been bought by SOHO (Shanghai) Investment Co Ltd, a wholly owned subsidiary of SOHO China Limited and will be renamed SOHO Century Avenue.
In nearby Suzhou, Jones Lang LaSalle acted for a California based leading semiconductor company to sell the company's 560,000 square feet assembly and testing factory. The building was bought by a Suzhou based domestic telecommunication equipment company listed in Shenzhen Stock Exchange. The highly specialized asset is located on 1.6 million square feet of land in Suzhou Industrial Park, the largest cooperation project between the China and Singapore governments. This is the largest MNC factory disposal transaction in Suzhou, one of the fastest growing cities in China and home to more than 80 of the world's top 500 corporations listed in Fortune Magazine.
In Japan investors are actively looking for opportunities. Jones Lang LaSalle recently completed a US$70 million sale and leaseback deal for a global IT company, of their high quality IT solution facility located on a one hectare site in Japan. There was widespread interest from domestic and offshore investors including a South Korean asset management fund and an Asian private equity fund. The successful bidder was a domestic institutional investor.
The most attractive market for international investors recently has been Australia, one of two countries in Asia Pacific with an S&P AAA credit rating, the other being Singapore. In the quarter to end June 2011, the total direct investment volumes in Australia real estate were just under U$ 4 billion, of which US$1.7 billion was from overseas investors.
This interest in Australia is expected to continue, as the economy is much more closely tied to China than to the US. Jones Lang LaSalle is currently selling one of Queensland's most successful retail assets, Cairns Central regional shopping centre. Cairns Central is a strong trading and fully enclosed regional shopping centre with a total gross lettable area of approximately 567,000 square feet. It is located in the heart of the Cairns CBD and is anchored by the only department store in the region.
‘Real estate is likely to be an attractive investment option in the current climate. We still have a lack of supply of good quality real estate in many Asia Pacific cities, which means that with sustained demand rents will continue to grow,’ said Stuart Crow, head of Capital Markets at Jones Lang LaSalle Asia Pacific.