Escaped the downtrend that caught every other major national Asia-Pacific (Apac) real estate market in the first quarter of this year, with commercial real estate investment jumping 72 year-on-year to US$1.9 billion, data released by Real Capital Analytics (RCA) on Tuesday showed.
"While the last three months of 2018 were dominated by a handful of major deals in the industrial sector, the start of this year was characterised by a more diverse range of transactions in the retail and office, as well as industrial sectors," said Petra Blazkova, the senior director of Apac analytics at RCA.
"Solid occupier demand in Singapore is also allowing investors to lock in higher rents," she added. Conversely, the Apac commercial property market got off to a slow start in 2019 as worries about the region's economic outlook took a toll on real estate activity.
According to RCA's Asia-Pacific Capital Trends report, overall investment volume tumbled 36 in Q1 2019 to reach US$30.5 billion, with Apac markets struggling to match the pace recorded in 2018. This was further exacerbated by macroeconomic concerns including China's slowdown, the US-China trade war, and the global downturn in consumer goods demand, RCA said.
The report covered transactions for the January-March quarter, weeks before US President Donald Trump's tweets on May 5 that he would impose a second round of punitive duties on US$200 billion in Chinese goods. The tweets sent global markets in a tailspin, with trade negotiations between Washington and Beijing still deadlocked.
Elsewhere in Asia, China and Japan suffered amid a more downbeat economic picture, with investment volumes in both countries registering a double-digit decline compared with a year ago. Nonetheless, Beijing was lifted to pole position for the first time in Q1 2019, from seventh place in 2018. This comes after two mega-deals of over US$1.3 billion accounted for more than half of its total investments amounting to US$4.5 billion.
Hong Kong was nudged into second place among Apac metropolitan markets with an investment volume of US$4.4 billion, and Tokyo came in third at US$3.9 billion. Singapore placed sixth, the same as last year. By sectors, the slowdown in the Apac office sector likely reflects elevated pricing levels, RCA noted.
While office assets were the mainstay of transaction volumes, retail assets broadly proved to be the flavour for the first three months this year, increasing by 8 to US$9.4 billion from last year as investors bought assets in Hong Kong, Tianjin and Singapore. That being said, offices still rank at the top of investor wish lists due to the ongoing cyclical recovery in the office market across most major metros.
Separately, cross-border investors from within Apac were also a more important source of capital in Q1 this year. In particular, the flow of intra-regional cross-border capital accelerated to account for US$8.6 billion. This growth was driven by Hong Kong-based investors who spent US$4.7 billion and invested in markets such as China, Japan and Singapore. Looking ahead, RCA said that the outlook for Apac's investment markets for the rest of the year may be more upbeat.
"The count of pending deals is high in markets such as Hong Kong, India and China. Moreover, reports indicate there is a record level of capital to be deployed in the region," RCA said.
Adapted From The Business Times, May 22 2019