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Recent data indicates commercial real estate investment in the region fell 27 per cent year-on-year in 2022, though year-end data suggests this trend may falter in coming months.
According to global real estate firm JLL, the investment decrease in the Asia Pacific (APAC) region was underpinned by tightening interest rates and global macroeconomic uncertainties. Last year, commercial real estate investment in APAC equalled $129 billion USD, in line with the firm’s prediction.
The year’s final quarter reported a 41 per cent year-on-year investment decline throughout the region, though this was counteracted by the $30.7 billion USD of capital deployed between October and December, which represented a 12 per cent quarter-on-quarter rise.
Singapore ended the year as the APAC region’s strongest-performing market, as total commercial investments soared 53 per cent year-on-year. This growth was boosted by strong office market activity during the year’s first half and a sizable one-off retail portfolio transaction in the year’s final month.
The city-state attracted just over $14 billion USD in direct investments, nearly double Hong Kong’s $7.7 billion USD full-year investment — a 24 per cent year-on-year drop off despite the region’s improved attractiveness in light of relaxed COVID-19 restrictions.
Despite attracting a region-leading $26.2 billion in direct investment throughout the year, South Korea still reported a year-on-year decline of 11 per cent. Meanwhile, Australia — described as ‘battling a disconnect between buyer and seller expectations’ — reported an investment decline of 38 per cent culminating in $20.9 billion USD being invested into the country’s commercial market.
Increased fourth-quarter activity in China saw the nation garner $24.8 billion USD in investment, down 37 per cent on 2021, while similar activity upticks in 2022’s final three months pushed Japan’s total investment to $24.7 billion USD for the year, down 40 per cent on the previous year.
Pamela Ambler, head of investor intelligence and strategy, Asia Pacific, at JLL, said that “green shoots in the fourth quarter ensured that the challenging investment market ended 2022 on a more optimistic note, snapping a year of volume declines.”
“We expect the bright spots of strong fundamentals in select office markets, value-add retail, and cyclical and opportunistic buying in the region’s more mature markets to help drive deal flows in 2023,” she added.
Additionally, Stuart Crow, JLL’s chief executive officer, capital markets, Asia Pacific, believes the year ahead is poised for an investment rebound as “price discovery will continue to be a major theme for investors in 2023 and is poised to influence deployment strategies for the first half of the year as bid-ask spreads tighten.”
He also heralded China’s reopening, Japan’s economic recovery, and “the belief that Asia Pacific will be the least impacted region by any global economic slowdown” as encouraging factors that may contribute to “a strong resumption of activity in the second half of 2023.”
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