Direct real estate investments totaling US$28 billion were made during the quarter
The number of real estate investments across Asia Pacific (Apac) slowed down in the 3rd quarter of 2022 according to research conducted by JLL. The total amount of US$28 billion ($40 billion) in direct real estate investments was recorded in the quarter, which was a y-o-y decrease in the range of 29%.
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JLL states that the decrease in volume of investment comes result of “a number of macroeconomic factors” that include lower trade volumes on major market, Apac currencies appreciating against the US dollar, and the aggressive reductions in US the interest rate. In light of these circumstances, Pamela Ambler, JLL’s director of investor intelligence for Asia Pacific, says the decrease in investment volume for 3Q2022 is “not unusual” noting that it is due to from a large number of transactions in 2021.
Stuart Crow, JLL’s CEO Capital markets Asia Pacific, adds that the buyers in Apac have been more cautious when it comes to capital investment, due to the shift in the world’s real property markets.
He believes, however, that investors are optimistic about the general outlook. “Despite the macroeconomic issues that continue to plague us such as inflationary issues, as well as the increasing price of credit, the majority of investors are generally positive about Apac real estate and have long-term and medium-term plans to increase their presence in this area,” Crow observes.
In Singapore investments for the third quarter of 2022 totaled US$2.3 billion, which is down from US$3.6 billion in the prior quarter. JLL blames the drop on prolonged negotiations over significant office transactions as a result of widening price differences between sellers and buyers. The volume is an 111.6% increase y-o-y. This is after a weak base in the 3Q2021.
In addition, Japan saw a 61% year-on-year decline in investment volume in the region of US$4.6 billion in the 3rd quarter of 2022. The volume of investment in Hong Kong fell 75% in a year to US$720 million. China saw an increase of 55% reduction in its investment volume up to US$3.3 billion, aided by the ongoing effect of the Covid-zero measure.
The investment market continued to be robust in Australia that logged US$7.3 billion of real estate investments. The 15% increase in the year-over-year was due to offices transactions that took place that took place in Sydney as well as Melbourne. South Korea also remained relatively resilient, registering a decline of 8% in a year-on-year basis to make US$6.4 billion in transactions.
As for sectors of office, transactions in Apac declined in value to US$14.4 billion, which represents the decline in the range of 33%. JLL says this is due to “sluggish” volume of transactions in Japan and China and less optimism amid the widening gap in prices between sellers and buyers.
Industrial and logistics transactions witnessed an increase of 52% volume drop y-o-y up to US$4.6 billion, supported by price adjustments triggered by rate hikes as well as the increasing cost of borrowing. Retail investment was also down in the 3Q2022, falling 13% in a year-on-year basis in the quarter to US$4.5 billion.
The hotel industry was the most profitable sector in the region with a growth rate of 16% over the course of a year to US$8.4 billion for transaction volume which was boosted by the ease of restrictions on social and travel.
Looking towards the future, Ambler anticipates investors will put off investment decisions until the fourth quarter, while waiting for more market information regarding the current economic situation. “In the meantime we expect the pace of re-pricing to increase and the process of price discovery to last through the end of the next year,” she adds.
To achieve this, JLL is forecasting 2H2022 Apac investment activity to decrease by to 12% or 15% when compared to 1H2022. In the whole year, it anticipates transactions to decrease by 25% per year.