Street protests and macroeconomic woes may be grabbing headlines in Asia Pacific, but investors in the region’s commercial real estate markets shrugged off the bad news to deliver a record-breaking $128 billion in transactions during the first three quarters of the year, according to JLL.
The brokerage found that growth in the region outperformed the rest of the globe, with transaction volume from January through September this year jumping 10 percent year-on-year, compared to 9 percent growth in the Americas and a 13 percent slump in Europe, the Middle East and Africa.
JLL’s latest Global Capital Flows report reveals that elevated activity in China and a strong rebound in Singapore helped buoy Asian deal volume to $42 billion in the months from July to September, the region’s best third quarter on record, representing an 18 percent year-on-year surge.
“Investors in Asia Pacific are seeing past current headwinds such as slowing growth and trade tensions,” noted Stuart Crow, JLL’s CEO of Asia Pacific Capital Markets in a statement. “Liquidity has strengthened in markets such as Seoul, Tokyo and Singapore, where occupier fundamentals remain solid.”
Seoul Registers $15.4B in Deals
Seoul was the region’s most liquid city, with $15.4 billion of real estate changing hands in the first three quarters, on par with last year’s levels. The Korean capital ranked third among global markets for investment volume, behind only New York and Paris. Major deals included the purchase of the iconic Seoul Square building by a fund managed by ARA Asset Management for a price estimated to be about KRW 1 trillion ($890 million), making it the largest sale of a single building in Korean history.
Tokyo, Shanghai, and Singapore were the region’s 4th, 6th and 8th most liquid cities, respectively, with deal volume reaching $15.2 billion, $14.4 billion, and $13.2 billion. Shanghai, which registered $3.5 billion of transactions in the third quarter, was the largest recipient of cross-border capital in Asia Pacific during the first three quarters, followed by Singapore and Sydney.
The mainland financial hub notched one of China’s biggest acquisitions of a commercial property by a foreign firm, when Canada’s Brookfield Asset Management agreed to buy the nearly-completed Greenland Huangpu Center in Shanghai’s South Bund area at a valuation of RMB 10.57 billion ($1.57 billion) in April.
Singapore Strikes Back
Year-to-date deal volume in Singapore hit a record level, according to JLL, as the Lion City came roaring back from a downturn across all property sectors. Robust rental growth and net absorption drove office transaction volumes up by more than 175 percent year-on-year, bolstered by the S$1.5 billion ($1.1 billion) acquisition of the Duo Tower project by Allianz and Gaw Capital in July.
The findings dovetail with a recently published survey by the Urban Land Institute (ULI) and PwC that named Singapore as the most attractive destination for capital in Asia Pacific. JLL’s report also ranks the city-state as one of the top sources of cross-border investment in the world, behind only Germany and the U.S.
Sydney joined Singapore as a prime magnet for cross-border capital, drawing an influx of investment primarily from Singaporean groups and Canadian pension funds during the third quarter. Large-scale transactions in the Australian city included Blackstone’s $1.1 billion purchase of a portfolio of office towers from Scentre Group in June.
Hong Kong Takes a Hit
Investment slowed considerably in Hong Kong during the first three quarters, as the city’s political crisis weighed on growth. A separate release by Real Capital Analytics indicates that commercial property deal volume dropped by 41 percent year-on-year to $13.9 billion in the first three quarters, although Hong Kong still ranked as the second-largest market in Asia Pacific, behind only Tokyo.
JLL expects deal volumes in Asia Pacific to further accelerate in the fourth quarter, bringing overall 2019 growth to 13 percent year-on-year. The property consultancy notes that Asian investors are eyeing deals in continental European markets, including Germany and France, as they spread their capital more broadly.
“We are expecting Asian investors to further diversify their real estate holdings within the region and globally in the months ahead as they seek higher yields,” Crow added in the statement.