13 August 2012, Hong Kong – Investment turnover in Asia Pacific surged by 54% q-o-q to US$17.9 billion as activity picked up in the second quarter after the Lunar New Year holiday breaks, according to the latest Asia Pacific Capital Marketview report published by CBRE, the leading commercial real estate services firm. However, sentiment in Asia Pacific was mixed as many investors remained mindful of the Eurozone debt crisis. Much of the activity in Q2 resulted from the completion of several major deals which had been under negotiation for a prolonged period.
The research report showed that China, Japan and Hong Kong are the markets recording the largest investment turnover in Q2 2012. In Hong Kong, the rebound in transaction volumes in Q1 2012 has maintained its momentum through Q2 2012. Local funds and private investors are more competitive on pricing and therefore most active while foreign funds are currently focused on divestment plans. End-user demand to purchase office space has become a key feature of the Hong Kong market as occupiers seek firstly to secure space in a market where vacancy is very tight, and secondly bringing some stability to volatile occupancy costs.
Following a quiet start to the year, China’s investment turnover in Q2 2012 was up more than threefold from Q1 2012, which was the highest growth amongst Asia-Pacific market players as a result of a number of large transactions completed by cash-rich domestic investors.
Greg Penn, Executive Director, CBRE Investment Properties, Asia commented: “In China, several deals were completed by foreign buyers but it remained very challenging for overseas investors to source deals. Investors’ interest will remain firm in the coming months with state-owned enterprises (SOEs) remaining especially active. Also, the past 12 months has seen a rise in investment demand for retail assets in China and Hong Kong, whilst the high yields currently available in the industrial sector continue to attract opportunistic investors.”
Commenting on the Hong Kong market, Dominic Chung, Executive Director, CBRE Investment Properties, Hong Kong said:” Investor sentiment has improved significantly over recent months, despite uncertainly surrounding eurozone economies and the potential impact on growth in Asia. Foreign funds continue to regard Hong Kong as the key mature market in the region and some have been successful in finding attractive opportunities as property owners decide to reap profits under favourable market conditions. Local players are still actively trading in the retail and office sectors and especially focusing on value-add propositions in decentralised locations.”
In Asia Pacific Domestic capital continued to drive the market, accounting for 83% of the total investment volume for the quarter but the quarter saw a rebound in cross-border acquisitions, thanks to increased activity among western property funds. Meanwhile, some property funds continued to find it challenging to source assets in Asia capable of passing their return hurdles.
The office sector remained the subject of strong interest, particularly in Australia and Japan,and comprised 47% of total investment turnover. However, the search for yields and growth has prompted investment focus to shift to other sectors.
“Barring significant negative developments in the Eurozone, it is anticipated that the investment market will continue to see a steady level of activity in key markets,’ said Dr. Nick Axford, Executive Director and Head of CBRE Research, Asia Pacific. “Domestic investors will continue to account for the bulk of activity in their home markets while crossborder investors are still looking to step up their acquisition of core assets in Australia and Japan.”
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