Asia Pacific real estate investment surges 20% in Q1 2022

Shanghai, May 24, 2022 – Investment growth in the Asia Pacific real estate sector continued in the first quarter of 2022 with volumes up 20% year-on-year. According to data and analysis published in the JLL Capital Tracker Q1 2022, $40.8 billion of capital was deployed via direct real estate investment into the region throughout the quarter. In the first quarter, China's commercial real estate investment reached $8.3 billion, similar to 2021 Q1. 

“Investors continue to diversify when deploying capital across Asia Pacific, represented by a swing of investments into retail assets, continued support for the office market, and high growth in Singapore, Korea and Australia allocations. Sector wise, retail and office performed strongly whilst logistics and industrial reported a moderated growth. We are optimistic that the region’s real estate sector will withstand rising interest rates and growing uncertainty.  We are still seeing intense competition for assets and maintain our projection of over $200 billion in direct investment into Asia Pacific for 2022,” says Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL.

The Asia Pacific retail sector registered the largest growth in the first quarter of 2022 with investments rising by 39% year-on-year. Over $8.0 billion in capital was deployed into retail assets throughout the quarter as foot traffic returned after loosening of pandemic management policies in most markets. Driven by attractive yields and diversification of portfolios, investors demonstrated renewed confidence in retail space.

Office remained the most popular sector in Asia Pacific measured by total volume, growing by 9% year-on-year to end the first quarter with $17.3 billion in direct investment. Buoyed by improved net absorption and rental growth, investors remained bullish on the region’s office sector.

Activity in the logistics and industrial sector rose 3.5% year-on-year but the pace of growth moderated with the sector only managing to garner $8.3 billion in capital deployed in the first quarter. The absence of large portfolio deals, and limited deal pipelines contributed to slower investment growth in the sector, despite broad interest from investors.

Hotel transactions remained resilient, reaching $3.1 billion as more hotels changed hands with investors attempting to buy at bargain or to convert underperforming hotels into living product. JLL expects the sector to rebound further in 2022, forecasting $10.7 billion transactions for the full year, up 15% on 2021.

In China, commercial real estate investment reached $8.3 billion in Q1 2022, remaining consistent with Q1 2021 levels. Office remained the most favored sector of investors, accounting for half of total investment volumes at $3.9 billion, while the industrial & logistics sector accounted to 21% of total transactions. Notable transactions included the sale of the DLJ Greater Shanghai Portfolio ($717 million) and Hyatt on the Bund Hotel transaction ($709 million).

The quarterly transaction volumes came as China’s policymakers have continued active management of the property market by lowering LPR by 20 bps, adjusting thresholds for homebuyers in selected cities, as well as postponing a proposed property tax. However, despite signals from the Central Government, banks are still reluctant to provide funding to developers.

With the recent Covid-19 outbreaks, Shanghai and several other cities have experienced strict pandemic control measures since the end of March. Consequently, investors are re-evaluating their investment direction, especially since certain asset types generate no income during this period. There are positive signs with continued interest in multi-family sector, which remained relatively unaffected by the control measures, and which will directly benefit from the announcement that the next round of real estate investment trusts (REITs) that will include affordable housing. 

“At the moment, concerns about slowing economic growth in China will affect investors judgment on asset values and investment returns. Looking ahead, the recovery of investment volumes will depend mainly on the pace and extent of loosening Covid measures in Beijing and Shanghai. In addition, the  recent interest rate hikes by US Fed and high inflation in many countries, whether these factors will affect international capital investment into China’s real estate market remains to be seen.” says Eric Pang, Head of Capital Markets, JLL China.