Mild increase seen this year amid higher prices and limited asset availability: CBRE
The Asia-Pacific real-estate investment market is expected to remain active in 2014, after transaction volumes last year hit their highest level since 2005, according to consultant firm CBRE.
Last year, transactions hit US$90.4 billion (Bt2.97 trillion), a rise of 24.2 per cent against full-year 2012 rates.
But despite foreseeing a bright 2014, Greg Penn, managing director for Asian capital markets, noted: “The investment volume is unlikely to increase significantly, as investors will become more apprehensive over high pricing, while the availability of assets for sale could act to constrain trades.
“Singapore and Japan offer more upside potential, however, particularly in the office sector, as both markets are expected to see strong occupier demand, which will drive rental growth.”
The increase in volume last year was led by strong investment activity in Australia, China and Japan, with these three markets each likewise recording their highest annual total since 2005.
Japan was the standout performer, with transaction volume surging a massive 110.5 per cent year on year to $23.7 billion thanks to the implementation of stimulus policies that boosted market sentiment. Australia grew by 35.5 per cent and China by 17.9 per cent year on year.
Led by Asia-Pacific institutional and private investors, 2013 also saw more cross-border activity, which increased 48.3 per cent year on year to $18.7 billion. Notably, in the fourth quarter Australia recorded its highest quarterly levels of purchases by foreign investors since 2005. Asian investors dominated, making up 75 per cent of the non-domestic buyers in Australia, with China, Malaysia and Singapore accounting for the majority of activity.
Japan likewise saw more activity from foreign property funds in the fourth quarter, which were particularly focused on buying office assets on the back of steady rising Grade A office rent. Foreign investors were also keen to invest in China. However, high asset prices and limited investable assets remained an obstacle to making direct real-estate investments, though there was an increase in those using offshore platforms to make acquisitions and purchasing equity stakes.
Penn commented that last year’s highs in investment volume and cross-border activity were driven by high levels of liquidity in the market, combined with such factors as the low interest rates and investors’ desire to deploy capital in a way that secures recurring returns – all of which contributed to the increased activity in real estate.
Western property funds remained net sellers in the market as some funds disposed of assets as they approached termination dates. However, some newly formed Western property funds continued to invest in the region with most of the interest focused on Japan.
Australia, China and Japan all recorded a high volume of deals involving office assets over the year, with Japan seeing interest from a mix of domestic and foreign investors.
Investors in Australia were largely foreign, while in China more than 50 per cent of the activity came from local players such as insurance companies and stated-owned enterprises.
“Although there were a lot of deals in the office space in 2013, demand for high-quality modern logistics facilities is increasing due to comparatively better yields and modernisation in the sector, particularly in countries like China, Japan and South Korea,” Penn said.