China Has the Greatest Share of Asia Pacific Investment; Transactions Increasingly Feature HNW and Middle Eastern Funds
November 13th, 2013, Beijing —Cross-border transactions featuring properties in Asia Pacific increased in Q3 2013, both intra-regionally and for investors buying from outside the region, according to the latest report by leading commercial real estate firm, CBRE. The trend includes Asia-based private investors and institutions seeking opportunities to place capital abroad, and increasing activity from sovereign wealth funds and pension funds from outside Asia Pacific.
Cross-border Acquisitions (12 months to end-Q3)
Source: CBRE Research
Asia Pacific cross-border activity rose by 5.5% quarter-on-quarter to US$5.2 billion in Q3, according to CBRE Research. Australia, Hong Kong, China and Japan saw the greatest share of non-domestic buyers, with Australia and China in particular seeing strong activity from buyers from outside the region. Although there was increased activity from international investors, domestic investors continued to dominate in most markets because they were able to move faster given their local advantages.
One emerging contributor to the cross-border flows was Asian high-net-worth investors. This quarter saw high-net-worth investors involved in several major deals, with overseas investment by this segment totaling US$631 million, a rise of 69% quarter-on-quarter and 571% year-on-year. “High-net-worth investors are becoming more positive about the market, but increasingly they see value and returns coming from direct investments like real estate. As a consequence they are diversifying away from their traditional equity and bond holdings to increase their exposure to real estate,” said Greg Penn, Managing Director, Capital Markets, Asia.
In terms of the overall market growth, commercial real estate transaction volume in Asia Pacific totaled US$21.6 billion in Q3—an increase of 10.8% on the US$19.2 billion recorded in Q2 2013. Market sentiment diverged during the quarter, and upbeat markets were led by Australia, China and Japan, all of which saw steady buying activity from local groups combined with sustained interest from foreign investors. Elsewhere, Hong Kong and Singapore saw weaker activity, whilst sentiment and activity weakened in Indonesia, Malaysia and Thailand.
Deals involving office assets continued to account for the bulk of transaction volume during Q3, comprising half of turnover, but rents and demand in this sector have remained flat for some time. “Availability and yields for prime office assets remained tight and investors continued to broaden their focus to secondary locations and non-core assets, while foreign investors generally became more opportunistic. As a result more investors started to focus on assets providing higher yields, in sectors benefitting from rapid growth in consumption-led demand,” according to Ada Choi, Director, Capital Market Research, Asia Pacific at CBRE.
In particular the industrial and logistics sector benefitted from this change, with transaction volumes up 75% to US$2.9 billion, with strong interest seen particularly in China and Japan. Demand for retail assets remained firm across virtually all markets, with Australia, China and Japan recording high volumes of deals.
Robert J. Rupar, Executive Director, Head of Investment Properties, CBRE China, commented on China market performance that:“China saw another busy period in Q3 2013 with several major transactions completed, although individual markets continued to diverge. Tier I cities continued to see strong interest from buyers despite rising prices and the limited supply of quality assets available for sale. State-owned enterprises were particularly active in buying office assets for self-use as they look to escape high rents. Activity in tier II cities was more muted by comparison with plenty of assets on the market but increasing concern among buyers about oversupply. “
“The outlook remains upbeat for the remainder of the year with the steady flow of deals expected to continue. In tier I cities many investors have been making unsolicited bids for buildings they’re interested in. Domestic property funds will remain active in comparison to their overseas counterparts as their investment criteria is more flexible and not so focused on the type of core asset that ticks all the boxes,” Robert added.
CBRE expects investment volume in Asia Pacific to remain high in Q4 2013 as there is a strong pipeline of deals in Australia, China and Japan, with other markets such as New Zealand and Taiwan also likely to remain active.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.