Domestic Investors Still Drive Market, But Institutional Investors Active Again
15 November 2012, Hong Kong – Buying momentum in key real estate investment markets in Asia Pacific remained strong in Q3 2012 amidst investors’ continued caution over the slowing economy and Eurozone debt crisis. Investment turnover of US$19 billion was 21% above the three-year quarterly average, with q-o-q transaction volume declining just 4.1%.
The sub-US$250 million market segment drove activity this quarter, posting a 17% increase in activity q-o-q.
*Note: Transaction data is based on real estate transactions valued US$10 million and above. It included real estate transactions reported in 25 major markets in 12 countries across Asia Pacific. It included office, industrial, retail and mixed-use properties. Development site, hotel and residential transactions are excluded.
Investment flows remained high in several major markets including Hong Kong, Singapore, Japan and Australia. Hong Kong saw an increase in deals involving office properties, and the bulk of office deals in this market were transactions for strata-title floors in decentralized locations which continue to record rental growth. As an example, just this week (13 Nov) CBRE announced the completion of sales for all Strata Office Floors of Rykadan Capital Tower in Kwun Tong. Hong Kong is also among a number of key markets which recorded a rise in investment turnover for retail properties during the 12-month period to September 2012.
Over the quarter, domestic buyers continued to dominate investment activity, accounting for 80% of transaction volume. However, there was strong appetite for prime assets among offshore institutional investors—particularly insurance and pension funds—which drove higher turnover in cross-border investment. Cross-border volume recorded a 22% q-o-q jump in Q3 2012. Australia, China and Japan remained the preferred destinations for foreign investors, while Singapore recorded its highest quarterly volume of net disposals by foreign investors since 2005, as several assets were sold by foreign funds to their domestic counterparts. Australia attracted the largest share of investment from overseas during the period.
In terms of preferred sectors, large institutional investors and funds backed by pension groups continued to prefer prime assets. However, there continues to be a shift of interest to the retail sector for greater long-term potential and industrial for yield and constrained supply.
“Investors remain optimistic regarding the medium- to long-term outlook for the region, despite the ongoing worries over external factors including the Eurozone debt crisis and weak United States economy,” Dr. Nick Axford, Executive Director and Head of CBRE Research, Asia Pacific commented. “There is increased interest from investors outside the Asia Pacific region and a structural increase in demand from expansion of Asian institutions.”
"The region is expected to see a steady flow of activity through the end of the year. There is a strong pipeline of deals in key markets over the remainder of 2012, but there is unlikely to be a significant increase in turnover in the final quarter, given that the last two quarters were both at the upper-end of historic quarterly levels,” said Greg Penn, Executive Director, CBRE Investment Properties.
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.