Investments in Q4 totaled $31.6 billion, ending a 7-quarter slump
According to new data by global real estate consulting firm JLL, commercial real estate investment in Asia Pacific rose 3% year-on-year (YoY) in Q4 2023 to $31.6 billion, reversing seven consecutive quarters of decreasing volumes. Overall annual investment across the region decline by 17% YoY to $106.8 billion in 2023.
China stood at the forefront of Asia Pacific’s investment rebound for the second consecutive quarter, recording a 50% YoY increase in volume to $11.1 billion. Meanwhile, sectors such as logistics (down -5% to $6.5 billion) and living (up 24% to $1.5 billion) performed better than other sectors, especially in China. Investments in office, down 13% YoY to $13.7 billion, continued to contract amid uncertainties on interest rate movements, the extent of re-pricing and occupancy.
“While the cost of debt remains elevated, investors across Asia Pacific are still erring on the side of caution. The prospect of interest rate cuts in 2024 may potentially reverse current trends, but we can expect greater sector diversification among investors – particularly towards sectors such as logistics and industrial and living, which have seen high investor conviction across the region,” said Stuart Crow, CEO, Asia Pacific Capital Markets, JLL.
While China was the most active market in the fourth quarter, Singapore experienced the steepest decline in investment volume – falling 29% YoY to $1.8 billion. However, while cross-border investments in Asia Pacific declined by 64% YoY to $3 billion in Q4 2023, Singapore emerged as the most active cross-border investor, making large hotel and logistics acquisitions across the region and accounting for 36% of quarterly investment volume.
Australia ($4.3 billion) and Hong Kong ($2.1 billion) both saw YoY improvements in investment volume, up 14% and 6% respectively. The improvement of the retail sector in Australia was the main contributor to higher investment volumes in the fourth quarter, while Hong Kong’s quarterly performance was bolstered by two sizeable office acquisitions made for occupation.
Meanwhile, investment volumes in Japan recorded a regression to $4.4 billion, a 53% YoY dip, as concerns over the Bank Of Japan’s (BOJ) cessation of its negative interest rate policy impacted investor interest in office assets.
Despite a strong domestic capital bias in South Korea, large office transactions contributed to the market’s $4.2 billion investment volume in Q4 2023 – which dipped by 7% YoY. While the leasing market held steady with low vacancy and positive rental growth, investment activities slowed down due to cautious investor sentiment.
“2023 concluded with a reduction in dry powder levels, indicating that investors deployed capital into the Asia Pacific commercial real estate market and were willing to take a long-term view in light of current market challenges. In 2024, challenges will remain with interest rate movements playing a decisive factor in investment activity and selling pressure mounting in some of the region’s bigger markets,” said Pamela Ambler, Head of Investor Intelligence, Asia Pacific, JLL.