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Activity strongest in Singapore, South Korea and Australia
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. Increases in investment volumes were most pronounced in Singapore, South Korea, and Australia. Sector wise, retail and office performed strongly whilst logistics and industrial reported a moderated growth rise of 3.5% year-on-year.
“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. 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.
Singapore commercial real estate recorded the largest investment growth trajectory in the region, up 134% year-on-year to finish the first quarter with $5.7 billion in investments, driven by large transactions in the office and retail space. South Korea continued to perform in the first quarter, growing 89% year-on-year to $8.2 billion on the back of diversified investments across office, retail and logistics and industrial sectors. Australia posted the third largest annual investment growth (up 49%) as investors deployed $4.7 billion of capital into the market, with a focus on office. Japan remained the region’s largest investment market ($8.5 billion) despite a year-on-year decline of 26%. China remained flat in the first quarter with volumes totaling $8.3 billion.
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 through transactions including Tanglin Shopping Centre ($642 million) in Singapore, Seongsoo E-mart (US$552 million) in Korea, and Casuarina Square (US$288 million) in Australia.
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, with notable deals including AlphaDom City Alpharium Tower (US$846 million) in Korea, Cross Street Exchange ($600 million) in Singapore, and Darling Quarter ($453 million for 50% stake) in Australia, reflecting sentiment.
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. Notable transactions included the sale of the DLJ Greater Shanghai Portfolio (USD $717 million) in China.
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.
“Investors are sitting on over $50 billion in dry powder and have demonstrated in the first quarter their confidence in spreading capital across geography and sector. In the coming months, momentum will shift towards logistics and industrial as supply comes to market, and funds will increasingly focus on income resilient sectors,” says Pamela Ambler, Head of Investor Intelligence and Strategy, Asia Pacific, JLL.
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This article was originally published by JLL here.