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Investors look to traditional favourites Hong Kong, Australia and Japan, with uplift in cross-border investment activity
SHANGHAI, 27 February 2018 – Investment volumes in the last quarter of 2017 reached a new high of US$52 billion in Asia Pacific, up 16 per cent compared to the same period in 2016, according to new data from real estate consultant JLL. Direct investment in China was RMB208 billion, almost the same as 2016.
Shanghai saw a notable 41% pickup in international investment to become the third largest recipient of offshore capital in the world. Investors were particularly active during the fourth quarter with nearly US$3.5 billion in acquisitions. Notable among them was Hong Kong-based Gaw Capital's US$757 million acquisition of Sky Soho, a group of Grade-A commercial assets.
Traditional favourites Hong Kong, Australia and Japan all saw an increase in transaction volumes, with Hong Kong's red-hot market leading the way. Its Q4 transaction volumes reached US$7.4 billion, a 171 per cent year-on-year increase driven by mega-deals such as the US$1.15 billion sale of Wheelock's 8 Bay East in Kwun Tong. Australia (+40 per cent) and Japan (+31 per cent) followed behind Hong Kong. The Hong Kong figures exclude the US$5.2 billion sale of The Centre, which will close in early 2018.
Driven by a number of high-profile deals throughout the year, investors from China, Singapore and Hong Kong took the top three places for most active cross-border purchasers of real estate in 2017. With combined foreign acquisitions of US$60 billion, capital from the three biggest spenders made up nearly 20% of all cross-border flows. By far the largest increase in activity came from Hong Kong, where overseas purchases have more than doubled since 2016. Similarly, capital outflows from Singapore have grown consistently in recent years, from just US$8.4 billion in 2014 to US$15.6 billion in 2017.
A record year for Chinese outbound capital flows saw acquisitions of foreign property worth US$39.4 billion in 2017. Not only does this represent a year-on-year growth rate of 31%, it also marks the first time that Chinese investors have been the most prolific movers of capital over the course of a full year. One of the key drivers for the exponential growth of Chinese outbound investment over the past years has been Chinese investors looking to diversify their portfolios. This factor will remain unchanged over the years to come. With tough government measures implemented to restrict capital flows since 2016, future capital flows will be measured and targeted. Investment decisions will be made in greater alignment with the government's strategic aims, its industrial policy and the international activities of Chinese corporations. With all of these, further growth of Chinese outbound investment can be expected in the medium to long term.
Australia remains a top pick for investors with its comparatively higher yields, strong rental growth prospects in Sydney and Melbourne, and position as one of the world's most transparent real estate markets. Investment volumes in Australia reached US$7.2 billion in Q4 2017, compared to US$5.2 billion in Q4 2016. Transaction volumes in Japan reached US$10.5 billion in Q4 2017, up 31 per cent year-on-year, with foreign investors remaining active. Norges Bank Investment Management, the Norwegian pension fund, made their first Asia Pacific real estate investment in Tokyo in December. The joint venture with Tokyu Land saw them scoop a portfolio of five prime retail assets.
For more information, download our "Global Capital Flows" report.
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JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December 31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, www.jll.com.
JLL has over 50 years of experience in Asia Pacific, with 36,000 employees operating in 94 offices in 16 countries across the region. The firm won the ‘World’s Best’ and ‘Best in Asia Pacific’ International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the fifth consecutive year by Real Capital Analytics. www.jll.com/asiapacific
In Greater China, the firm was named ‘Best Property Consultancy in China’ at the International Property Awards Asia Pacific 2016, and has more than 2,200 professionals and 14,000 on-site staff providing quality real estate advice and services in over 80 cities across the country. www.joneslanglasalle.com.cn
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