Japan Deals Jumped 37% as North Asia Led Q4 2020 Investment Rebound

North Asia proved to be the most resilient slice of the Asia Pacific region in the fourth quarter of 2020 as Japan, China and South Korea recorded a jump in real estate transactions, according to research by JLL.

Drawing on their stronger economic recovery and deeper pools of domestic capital, the three mature markets signalled further momentum as the curtain fell on a year in which real estate investment dipped 20 percent in Asia Pacific, the agency said in its JLL Capital Tracker report.

Fourth-quarter deal volume surged 37 percent in Japan, 21 percent in China and 16 percent in South Korea from third-quarter levels.

“Given that transactions approached pre-pandemic levels in the fourth quarter, we expect investor confidence to grow in 2021 as capital adapts and the longer-term opportunities in the region become clearer,” said Stuart Crow, JLL’s chief executive for Asia Pacific capital markets.

Sheds Shine

Regionwide, logistics and multi-family investments bucked the broader losing trend in 2020, up 29 percent and 26 percent from the year before. The two asset classes made up nearly 30 percent of total volume, while hotel, retail and office transactions fell more than 25 percent year-on-year.

In Japan, logistics and multi-family investment volume accounted for about half of all transactions last year.

In August, Asia’s biggest logistics developer, GLP, launched a $2.6 billion open-ended Japan logistics fund seeded with 11 newly developed logistics assets in Greater Tokyo and Osaka. Last month, the Singapore-based firm announced a second closing for GLP Japan Income Fund, bringing the vehicle to $5.4 billion in assets under management.

Other alternative asset segments also showed strength in Japan. Singaporean sovereign fund GIC last April set up a joint venture worth more than $1 billion with data centre provider Equinix to develop hyperscale server facilities in the country.

The year ended with a marquee office deal as BentallGreenOak purchased the Avex Trax headquarters building in Tokyo from Avex Group for $693 million.

China Active

Logistics investment dominated in China, capped by private equity giant Blackstone’s purchase of a 70 percent share in Guangzhou International Airport R&F Integrated Logistics Park from Guangzhou R&F Properties for $1.1 billion in a deal announced in November. Earlier in the year, GLP achieved a final closing on its $2.1 billion China-focused logistics core fund, while LaSalle Investment Management raised $681 million for the first closing of a China warehouse development and management fund.

The fourth quarter’s key mainland office deal was Hong Kong-listed Shui On Land teaming up with the UK’s family held Grosvenor Group on a 50:50 joint venture to buy the Nanjing International Financial Center from debt-riddled conglomerate Sanpower for $250 million.

South Korea, meanwhile, showed the benefits of controlling the COVID-19 contagion with one of Asia Pacific’s best performing office markets, with Seoul rents climbing 6 percent in 2020 — the strongest in the region. Employment and office demand in the capital have held up despite the pandemic, JLL said.

Logistics and data centres also gained traction. In June, Hong Kong-listed ESR closed on a $1 billion joint venture with the Canada Pension Plan Investment Board and the Netherlands’ APG Asset Management to develop industrial real estate projects in South Korea. In September, UK fund manager Actis announced a joint venture with Korean conglomerate GS Group on a $315 million data centre in Greater Seoul.

JLL forecasts that Asia Pacific real estate investment will continue to rebound in 2021, with direct transactions to rise 15-20 percent year-on-year.

The agency’s top picks for investment this year are logistics, particularly in Shanghai, Seoul and Tokyo; Singapore offices; and Tokyo multi-family.