APAC Real Estate Investment Fell 29% in Q3 as China Led Slowdown

Asia Pacific real estate investment fell 29 percent year-on-year in the third quarter as cautious investors fretted over rapid currency depreciation against the dollar and the rising cost of debt, a report said this past week.

JLL’s Asia Pacific Capital Tracker 3Q22 reported a 116 percent rise in Singapore real estate transactions that closed to $2.3 billion for the quarter, mostly from large office deals.

The company also noted “robust” activity in Australia with deals totalling $7.3 billion, up 15 percent year-on-year, supported by high-profile office transactions like Singapore sovereign fund GIC’s purchase of a half-stake in a $568 million Melbourne development, 555 Collins Street, from Charter Hall.

South Korea remained one of the region’s most “resilient markets”, with $6.4 billion in transactions closed, an 8 percent year-on-year decline, while a depreciating yen pushed volumes down in Japan to $4.6 billion, a 61 percent year-on-year decline.

Greater China Ailing

Transaction volumes in mainland China totalled $3.3 billion for the quarter, down 55 percent year-on-year, while Hong Kong’s market totalled $720 million, down 75 percent.

“Conditions in global real estate markets have changed throughout the year and, as a result, investors active in Asia Pacific have adopted a more cautious approach to capital deployment in the third quarter,” said Stuart Crow, JLL’s chief executive of Asia Pacific capital markets.

“Despite the ongoing macroeconomic challenges, inflationary concerns, and the rising cost of debt, investors that we are speaking to remain broadly positive on Asia Pacific real estate and maintain medium to longer term plans to continue to expand their footprint in this region,” Crow said.

Office Pricing Gap Widens

In terms of sectors, office transactions fell 33 percent to $14.4 billion. JLL attributed the result to “sluggish volumes in Japan and China” coupled with softer sentiment amid a “widening pricing gap between buyers and sellers”.

Logistics and industrial transactions declined by 52 percent to $4.6 billion as rate hikes and the rising cost of debt prompted price corrections in several markets.

Retail investment in Asia Pacific dipped 13 percent to $4.5 billion, JLL said, citing reduced consumer sentiment and discretionary spending outlook.

Hotels were the region’s “most consistent performer”, with transactions totalling $8.4 billion to date in 2022. A post-pandemic recovery in international and domestic tourism, JLL said, is “driving global and regional investors into the asset class”.

However, investors adopted a more cautious approach and wait-and-see attitude when deploying capital, partly due to lingering COVID restrictions, according to Eric Pang, head of China capital markets at JLL.