APAC Commercial Real Estate Investment Fell 27% to $129B in 2022: JLL

Commercial real estate investment in Asia Pacific plunged 27 percent year-on-year in 2022 to $129 billion, as a tightening interest rate cycle and global macroeconomic uncertainties drove decision-making, according to JLL.

The fourth quarter alone saw a 41 percent year-on-year decline in activity, the property consultancy said in its Asia Pacific Capital Tracker report. But the capital deployment of $30.7 billion between October and December represented a quarterly increase of 12 percent — snapping four quarters of decline and reinforcing JLL’s conviction that the slowdown is likely to moderate this year.

Real estate investors reset short-term deployment strategies in 2022 but remain committed to the longer-term prospects of the region, said Stuart Crow, JLL’s Asia Pacific CEO of capital markets.

“Price discovery will continue to be a major theme for investors in 2023 and is poised to influence deployment strategies for the first half of the year as bid-ask spreads tighten,” Crow said Tuesday in a release.

Lion City Bucks Trend

Singapore emerged as the best-performing APAC market in 2022 as commercial real estate investment jumped 53 percent to $14.2 billion, with Link REIT’s $1.6 billion acquisition of two suburban malls from Mercatus Co-operative providing a key fourth-quarter boost.

The most active investment market was South Korea, which posted $26.2 billion in transactions as volume eased 11 percent from a record-breaking 2021. Placing second was China with $24.8 billion, down 37 percent, followed closely by Japan, where a solid fourth quarter lifted investment to $24.7 billion for the year, down 40 percent.

Hong Kong’s attractiveness improved after the relaxation of COVID-19 curbs, but full-year volume tumbled 24 percent to $7.7 billion. Australia, grappling with a disconnect between buyer and seller expectations, saw a 38 percent dive to $20.9 billion.

“Encouragingly, factors including the reopening of China, an expected recovery in Japan, and the belief that Asia Pacific will be the least impacted region by any global economic slowdown, bodes well for a strong resumption of activity in the second half of 2023,” Crow said.

Hotels Back in Style

In terms of sectors, hotels were Asia Pacific’s best-performing asset class in 2022 as the resumption of business travel and tourism pushed investment up 7 percent to $10.1 billion.

Offices remained the region’s most traded asset class, chalking up $60.5 billion in investment for an 18.7 percent drop from 2021 levels. Far behind were logistics and industrial with $25.9 billion in capital deployed, down 46 percent, and retail with $23 billion, down 39 percent.

Pamela Ambler, head of investor intelligence for Asia Pacific at JLL, said the appearance of “green shoots” in the fourth quarter ensured that the challenging investment market ended 2022 on a more optimistic note.

“We expect the bright spots of strong fundamentals in select office markets, value-add retail, and cyclical and opportunistic buying in the region’s more mature markets to help drive deal flows in 2023,” Ambler said.