Institutional investment in Asia-Pacific real estate markets has increased by 40%.

 

According to global real estate consultancy CBRE, four major transactions worth more than $500 million each were completed in the third quarter of 2014, bringing overall real estate investment value in Asia Pacific to $35 billion, up 40% quarter-on-quarter. South Korea, Japan, and Australia saw particularly high levels of activity. The region's cross-border investment activity has remained active, totaling $16 billion in the first nine months of 2014, up 20% year on year. qatar seal

Greg Penn, CBRE's Managing Director of Capital Markets, said, "Looking ahead, we anticipate a busy market for the rest of the year, with Japan and Australia leading the way in terms of transactions. Investor confidence is also that in Southeast Asia and India, especially in Vietnam, as the country's economy improves and prices rise. With India, we're seeing more international investors interested in forming joint ventures with local companies. Following the May election of a new government in India, business morale has improved.

In the meantime, newly founded private equity real estate funds became more involved in expanding their portfolios in Q3, with more funds expected to complete their fund raising operation by the end of the year. As foreign institutional investors continue to show a strong appetite for core assets, several big deals are expected to be concluded."

Other noteworthy features include:

In Q3, South Korea saw the largest commercial real estate deal in Asia Pacific, with Hyundai Motor Company and KIA Motors paying $10 billion for the KEPCO headquarters in Seoul, driving quarterly turnover to its highest level since 2005. With the exception of this transaction, transaction volume was identical to that of Q2.

Due to the broad yield spread over the lending rate and the fluid lending climate, strong investment activity continued in Japan, where transaction volume increased significantly. Acquisitions by owner-occupiers and dispositions by property firms propelled China's activity elsewhere.

The pace of office leasing is picking up, but occupiers are still cost-conscious, and core location demand is being bolstered by flight-to-quality operation. This quarter's increase in office prices was aided by an improving occupier demand. In Q3 2014, the CBRE Asia Pacific Office Capital Value Index increased by 1.7 percent from the previous quarter, compared to 0.6 percent in Q2. Price growth was led by Tokyo, which increased by 8.1 percent quarter over quarter, as well as Australia and New Zealand.

Strong investment demand for retail assets was reported in Australia and Japan, as both markets continued to see robust expansionary activity from international retailers. As retailers expand outside of Tokyo, investors in Japan are looking for opportunities in regional cities. The CBRE Asia Pacific Retail Capital Value Index increased by 1.9 percent quarter over quarter, with Tokyo, Sydney, and Melbourne driving the increase. Investor sentiment in Greater China and Singapore, on the other hand, remains poor.

Meanwhile, logistics remains a hot market, with transaction volume increasing by 53% quarter over quarter to $4.8 billion in Q3 2014, primarily due to industrial-focused J-REITs expanding their portfolios through acquisitions in Japan.

Ada Choi, Senior Director of CBRE Research, added, "Overall, high liquidity will support investment activity, particularly in mature markets that benefit from low interest rates and increased leveraging. The current pricing, on the other hand, is barely helped by a slow recovery in rental growth in some areas of the city.

Investors are becoming more patient in their quest for better investment opportunities. Aside from core assets, investors are paying closer attention to secondary assets and value-added strategies like asset enhancement to capitalize on upgrading occupier demand and higher anticipated returns."