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China

Asia Pacific investments hit record-breaking US$81 billion in 1H18


Hong Kong set the world's record for the most expensive real estate transaction

SHANGHAI, 10 September 2018 – Investment volumes in Asia Pacific hit a record-breaking US$81 billion in 1H18, up by 30 percent YOY, according to the latest data from JLL. Chinese cities Hong Kong and Shanghai accounted for two of the top 10 most active cities worldwide, with Hong Kong jumping to the third spot on the list, after London and New York.

 

Most active cities, H1 2018

Rank

H1 2017

Rank

H1 2018

City

H1 2018(US$ bn)

H1 2017(US$ bn)

1

1

London

15.8

15.5

2

2

New York

15.8

11.2

10

3

Hong Kong

14.6

5.8

4

4

Tokyo

12.4

7.6

9

5

Paris

11.6

6.1

6

6

Seoul

10.2

6.8

3

7

Los Angeles

8.5

10.1

22

8

Chicago

7.0

3.0

7

9

Shanghai

6.6

6.3

8

10

Washington, D.C.

6.5

6.2

 

"Asia Pacific's property markets continue to perform well despite global political and economic uncertainty," says Stuart Crow, Head of Asia Pacific Capital Markets at JLL. "Globally, the pace of deal making in Asia Pacific has raced ahead of Europe and the United States, as the transaction volume growth in this region is being supported by a continued cyclical recovery in developed markets such as Hong Kong (China), Australia and Japan."

Hong Kong pushes ahead as the region's most traded city

Transaction volumes in Hong Kong grew to US$14.6 billion in 1H18, compared with only US$5.8 billion during the same period in 2017. The city led the way as the region's most active city, following the sale of the 73-storey office tower—The Center—for US$5.1 billion. Not only was it the largest single-asset transaction of the year so far, but is also the world's most expensive real estate transaction ever.

"Prices in Hong Kong's Central sub-market have been pushed up because of a combination of tight vacancy rates, robust occupier demand and a lack of new supply. Coupled with an influx of Chinese occupiers and investors, these factors have accelerated an increase in real estate prices," says Joseph Tsang, Head of Capital Markets at JLL Hong Kong.

"Despite the rising prices, investor appetite remains resilient. Between 2015 and 2017, mainland buyers spent an average of US$2.1 billion per year on offices in Hong Kong. This year is set to exceed that figure given that, to date, there has been more than US$2 billion worth of office acquisitions already transacted," explains Mr. Tsang.

Asian investors snap up global funds divestments

Meanwhile, Asian investors were the most active net buyers of commercial real estate in 1H18. The group alone purchased 20 percent of the office, hotel and retail assets disposed by the global funds, which were the largest net sellers of commercial real estate—with a total worth of US$31.5 billion between January and June.

Investors from Hong Kong, Singapore and South Korea stepped in to provide liquidity, demonstrating the depth of the buyer pool from the region.

"While many of these investors have favored the United States in prior years, pricing pressures in core markets and rising hedging costs are driving many Asian groups to consider investments in Europe, instead," explains Mr. Crow. "This has been the case for South Korean investors—for instance—who face high hedging costs when investing in the United States. In fact, South Korean purchases in Europe were double those made in the United States at the half-year mark in 2018."

Appetite for scale in logistics and alternatives is growing

Across the region, the office sector formed over half of all transaction volumes, with retail following at 20 percent. Industrial and logistics, which made up 13 percent of transactions, saw a 27 percent growth YOY as both foreign and domestic investors continue to favor the sectors.

"Investors are upping their exposure to real estate in Asia, with a growing number of groups increasing their allocations to the sector, thanks to its defensive qualities, steady income stream, and relative performance compared to other asset classes. Shifting demographic and technological trends are driving appetite for scale, especially in the logistics and alternatives sectors," adds Mr. Crow.

"In China, the logistics sector has topped the investors' list as an appealing commercial asset type. Meanwhile, the investors are also turning their attention to alternative investments," says Mr. Eddie Ng, Head of Capital Markets at JLL China.

In the logistics market, for example, JLL recently assisted Vanke Logistics to acquire a portfolio that spans seven cold-chain logistic properties and an operational business in mainland China from Swire Pacific. This deal is Vanke Logistics' new major acquisition after they led a consortium to buy out Singapore-listed Global Logistics Properties last year.

In China's alternative investment market, CITIC Capital and Baring Private Equity Asia acquired Wall Street English from Pearson for US$300 million in 1Q18. In April, Lendlease, a leading property developer from Australia, signed a 50-year land usage contract with the Qingpu district government in Shanghai to develop its first senior living community in China, with approximately AUD $400 million. 

For more information, please download JLL's Global Capital Flows here.

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About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with nearly 300 corporate offices, operations in over 80 countries and a global workforce of 86,000 as of June 30, 2018. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com