Japan, South Korea Deals Boost APAC Real Estate Investment by 13%: JLL

Asia Pacific was the sole global region to see growth in commercial real estate investment in the first quarter of 2024, as deal volume rose 13 percent year-on-year to reach $30.5 billion, according to JLL.

The mature markets of North Asia led the upswing in activity, with Japan volume surging 29 percent to $11.5 billion and South Korea investment spiking 73 percent to $4.3 billion. The January-to-March jump from the same period a year earlier marked the second straight quarter of recovery for a regional market that had previously suffered seven straight quarters of declining volume, the consultancy said in its Capital Tracker report.

Office remained the most active sector despite a 1 percent year-on-year dip in volume to $12.6 billion, while industrial and retail recorded respective growth of 36 percent to $7.8 billion and 8 percent to $5.7 billion.

“The first quarter reflects a continued appetite from investors looking to capitalise on Asia Pacific’s strong economic fundamentals and attractive pricing opportunities across markets and asset classes,” said Stuart Crow, CEO of APAC capital markets at JLL. “We’re seeing renewed interest from domestic and cross-border sources targeting a diverse range of risk profiles.”

Tokyo Tower on Top

The largest single-asset APAC deal tracked by JLL in the first quarter was Gaw Capital Partners’ sale of the Aoyama Building in central Tokyo to Taisei Corporation for $592 million. Hong Kong-based Gaw had acquired the 13-storey office tower from GreenOak Real Estate in 2019 for a reported JPY 84 billion (then $750 million).

Japan also witnessed two significant industrial transactions in the first three months of the year: a KKR-managed J-REIT bought a logistics portfolio from KKR-backed Logisteed for $729 million and PAG picked up a Nagoya warehouse complex from Hines for $441 million.

In South Korea, a Seoul office tower topped the table as Blackstone sold the 24-storey Arc Place to Koramco for $588 million. The investment giant had purchased what was then Capital Tower from Mirae Asset Global Investments for a reported KRW 470 billion (then $430.9 million) in 2016.

Regional powerhouse Singapore enjoyed 14 percent year-on-year growth to $2.2 billion as JLL observed capital allocation pivoting towards retail assets.

The city-state market sparked to life with Allgreen Properties’ $410 million purchase of the suburban Seletar Mall from a joint venture of Cuscaden Peak and United Engineers Ltd. The local development arm of Kuok Group added the property in the Fernvale area to a portfolio that already includes the Great World complex and the Tanglin Mall in Singapore’s Orchard area, as it prepares for the launch of its Pasir Ris Mall project on the upper east coast.

Interest Rates Still Haunt

Most of APAC’s other key markets saw investment volume shrink in the first quarter. Australia and China each registered a 19 percent year-on-year drop to $3 billion and $5.6 billion respectively, while Hong Kong endured a 54 percent plunge to $700 million.

Offshore investors looked for “special situations” in mainland China as more distressed opportunities became available, according to the report, but foreign capital remained indifferent to Hong Kong as evidence of repricing began to emerge.

Uncertainty surrounding interest rates continues to influence APAC investment activity as markets recalibrate their expectations, said Pamela Ambler, head of APAC investor intelligence at JLL.

“Sentiment continues to be influenced by the strong US economy despite higher base rates, potentially leading to a prolonged path to the beginning of a reduction cycle,” Ambler said. “Looking ahead, we expect further investment activity as repricing sets new benchmarks for trade, and investors adapt their portfolios and strategies to the current rate environment.”