Investment in commercial real estate in Asia Pacific Rises 30% in 2021

Asia Pacific commercial real estate investment volumes continued to rebound strongly in the first nine months of 2021, up 30% from the same period in 2020, according to global real estate advisor JLL.

Year-to-date, direct real estate transactions in the Asia Pacific region totaled $125 billion, which is just 6% less than in the same period in 2019 as investors put money into more income-resistant assets like the office and logistics sectors.

JLL’s Capital Tracker Q3 2021 analysis revealed that third-quarter investment in Asia Pacific was $39.5 billion, an increase of 10% over the same period last year. However, due to several regional economies being impacted by the resurgence of Covid-19 and the ensuing restrictions limiting activity, transactions were down 23% quarter over quarter.

“Our client interactions confirm the appeal and resiliency of the Asia Pacific commercial real estate sector despite the ongoing unpredictability. Investor interest in the area has remained extremely high throughout 2021 as capital becomes more active and volumes in the region approach pre-pandemic levels, and we anticipate this trend to continue into the fourth quarter “says Stuart Crow, CEO of JLL’s Asia Pacific Capital Markets.

Office investments recovered further in the third quarter of 2021, accounting for 55% of deals, helped by stabilized rents and occupancy levels. Concurrently, logistics transactions have increased, with investments totaling $43 billion over the past 12 months, up from $25 billion in 2019. According to JLL, between 2023 and 25 logistics investment will more than double to $50–60 billion due to favorable demand drivers, alluring yield spreads, and a desire for diversification.

Investments in retail and hotels have been subdued as a result of the region’s economic recovery being slowed down by Covid-19 outbreaks. According to JLL estimates, hotel investment volumes will surpass $7 billion for the entire year of 2021 and reach $9 billion in 2022.

Due to significant industrial and office sales, Australia saw a geographically significant increase in activity, with over $6.3 billion in direct investments recorded for the quarter. The activity of domestic REITs and investment managers helped Japan reach $11.8 billion (up 51% year over year) and South Korea reach $7 billion (up 1% year over year). As a result of Covid-19 restrictions, investment activity in Singapore decreased to $1.1 billion, a 64% year-over-year decline, while investment activity in China ended the quarter at approximately $7.3 billion, a 16% year-over-year decline.

“With investors facing fierce competition for income-resilient assets like office and logistics as well as in more specialized sectors like self-storage, residential, and data centers, we anticipate portfolio reallocation to remain a major theme into 2022. Investor sentiment is still generally positive, and we continue to predict that investment volumes will increase by 15 to 20% in 2021, with further improvement anticipated in 2022 “says Regina Lim, head of JLL’s Asia Pacific capital markets research department.