APAC commercial real estate investment rose in Q224

Shanghai, 21 AUGUST 2024 – Commercial real estate investment in Asia Pacific rose 2% year-on-year (YoY) in Q2 2024 to US$27.3 billion, marking the third consecutive quarter of growth for the region. According to data and analysis by global real estate consulting firm JLL, H1 2024 investment volumes totalled US$57.5 billion, a 7% increase from the same period a year ago.

Office remained the most active sector, with Asia Pacific office volumes reaching US$10.7 billion in Q2. Growth led by offices was supported by retail and hotels, which continued to record volume growth from a year ago. Asia Pacific retail volumes rose 12% YoY to US$4.6 billion and hotel volumes grew 19% YoY to US$5.7 billion for H1 2024.

“The cost of borrowing remains elevated in most Asia Pacific markets except Japan, resulting in real estate assets in the region facing repricing pressure across the office, retail, and logistics sectors. However, the region’s office sector has seen transactional growth despite the ongoing financing challenges faced by global investors,” said Stuart Crow, CEO, Asia Pacific Capital Markets, JLL. “Coupled with strong prime rental growth in many markets and anticipated declining bond yields in the coming quarters except in Japan, return expectations are set to improve, further boosting investor sentiment.”

Japan was the most active market in the region, recording US$5.8 billion in Q2 trades, driven by a surge in hotel deals fuelled by a weak yen and booming tourist arrivals. Singapore (US$1.9 billion) and Australia (US$5.4 billion) both recorded YoY growth in investment volumes, up 31% and 73% respectively. Meanwhile, South Korea recorded a 5% decline in investment volume for H1 2024, with US$3.5 billion recorded in Q2.

China volumes were USD 4.9bn in Q2 (H1: USD 10.5bn), rising 5% YoY. Overseas institutional investors maintained a cautious approach towards China’s commercial real estate. The investment market is primarily driven by domestic end-users, especially in the office sector. End-users came from industries including securities companies, energy, retailers, and government-backed firms.

China Retail volume topped the region, and broadening the government’s REITs pilot to include department stores and shopping malls may see more retail assets trade in prime locations in the future. Rental housing assets continued to hold appeal to investors, with several transactions recorded in Shanghai during the quarter. As some developers try to offload assets, foreign institutional investors and domestic insurers are looking at acquisition opportunities of those high-profile assets.

“The travel market is accelerating its rebound, with the number of domestic travellers expected to exceed 6 billion this year, a year-on-year increase of 23%. Meanwhile, the expansion of China's visa-free circle is further boosting the recovery of inbound tourism, generating strong high-end demand for hotels in business-travel gateway cities. Driven by the dual growth in domestic and international demand, the domestic hotel investment market has received more attention, with hotel assets in strong first-tier destination markets, such as Beijing and Shanghai, being sought after by all types of investors due to their scarcity and better liquidity,” said Eric Pang, Head of Capital Markets, China, JLL.

“As for the office property, we expect stand-alone and strata-title office property to remain popular with self-use corporate buyers. Meanwhile, we have also noticed that funds from outside Shanghai and state-owned platforms are actively seeking Shanghai office and business park assets. In the context of the current Shanghai office building market, where prices are gradually returning to a rational level, the acquisition of such assets can bring stable cash flow income and meet certain self-use needs, which will help these companies expand their exposure and promote investment attraction.” Eric Pang added.

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