Property investment volumes in Asia Pacific decreased 29% in 3Q2022

The number of real estate investments across Asia Pacific (Apac) slowed down in the 3rd quarter of 2022 according to research from JLL. The total amount of US$28 billion ($40 billion) in direct real estate investment was reported during the quarter, which was a y-o-y decrease in the range of 29%.

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JLL states that the decrease in investment volume is due to the result of “a range of macroeconomic issues” that include lower trade volumes in the major market, Apac currencies appreciating against the US dollar, as well as the aggressive increasing of US the interest rate. In light of these circumstances, Pamela Ambler, JLL’s director of investor research, Asia Pacific, says the lower volume of 3Q2022 is “not unusual” and adds that it’s on from a large number of transactions in 2021.

Stuart Crow, JLL’s CEO capital markets Asia Pacific, adds that the buyers in Apac have been more cautious when it comes to capital deploymentdue to changes in the global real market.

He believes, however, that investors are optimistic about the general outlook. “Despite the current macroeconomic difficulties such as inflationary issues, as well as the increasing costs of borrowing, the investors are mostly positive on Apac real estate, and are pursuing long-term and medium-term plans to keep expanding their presence in this Apac region,”” Crow observes.

In Singapore the volume of investment in the 3Q2022 period totaled US$2.3 billion, which is down from US$3.6 billion in the prior quarter. JLL blames the drop on prolonged negotiations over significant office deals because of widening price differences between sellers and buyers. The volume is the of 116% increase y-o-y. This is after a weak base in the 3Q2021.

Additionally, Japan saw a 61% decrease in investment volume up to US$4.6 billion in the 3rd quarter of 2022. Hong Kong’s investment volume fell 75% year-on-year to US$720 million. China recorded 55% decrease in its y-o-y value up to US$3.3 billion, which was fueled by the effects of the Covid-zero measures.

However, investment activity continued to be robust in Australia that logged US$7.3 billion of real estate investments. The 15% growth in Y-O-Y was fueled by commercial transactions taking place which took place both in Sydney as well as Melbourne. South Korea also remained relatively resilient, registering a decline of 8% per year to record US$6.4 billion in transactions.

In terms of industries that deal in office services, the total in Apac declined by a factor of US$14.4 billion, which is an increase in the range of 33%. JLL says this is due to “sluggish” numbers of transactions in Japan and China as well as lower sentiment due to the growing gap in prices between sellers and buyers.

Industrial and logistic transactions recorded the industry see a 52% volume drop y-o-y up to US$4.6 billion, aided by price reductions caused by rate hikes as well as the increasing costs of borrowing. Retail investment also slowed in the 3Q2022, slipping 13% in a year-on-year basis in the quarter to US$4.5 billion.

The hotel industry was the most profitable sector in the region growing by 16% over the course of a year to US$8.4 billion for transaction volume which was boosted by the ease of restrictions on travel and social.

Looking towards the future, Ambler anticipates investors will hold off on investment decisions during the fourth quarter as they wait for more market information regarding the current economy’s state. “In the meantime we expect the pace of re-pricing will increase and the process of price discovery to last through the end of the year ahead,” she adds.

To achieve this, JLL is forecasting 2H2022 Apac investment activity to decrease by to 12% up to 15% when compared to 1H2022. For the entire year, JLL expects the volume of transactions to decline by 25% year-over-year.