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As global Q1 volumes break USD100bn for first time in five years
SINGAPORE, 6 May 2013 – Direct
commercial real estate investment globally reached a milestone in the first
quarter of 2013, according to Jones Lang LaSalle’s latest Global
Capital Flows report, released today, with the highest Q1 global
transaction volume recorded since 2008. Volumes came in at USD105 billion
for Q1 2013, with all three regions witnessing growth year on year, as the
weight of money chasing real estate has increased significantly.
USD27 billion was invested directly in Asia Pacific
commercial real estate in Q1 2013, which is on par with Q4 of last year, but up
26 percent on the first quarter of 2012. Asia Pacific was the only region not
to see a decline in volumes transacted compared to Q4 of 2012. An
increased proportion of transaction volumes in the Asia Pacific region in the
first quarter was made up of domestic deals (USD20 billion), with cross border
investment (USD 7 billion) down 24 percent year on year and down 11 percent
quarter on quarter.
Stuart Crow, head of Asia Pacific capital markets
at Jones Lang LaSalle said: “Continued quantitative easing globally is
increasing liquidity and reducing the cost of debt in Asia Pacific, which is
making real estate assets more accessible to investors within Asia Pacific.”
He continued: “We maintain our expectation of an
increase in transaction volumes in Asia Pacific to USD110 billion for 2013,
which will be about 12 percent up on last year, and we think that Japan is going
to be the ‘one to watch’ this year. We expect a lift in investment activity in
the country, as positive signs are emerging following announcements about
stimulus measures targeted at reflating the Japanese economy.”
Asia Pacific on the global stage
Investors from Asia Pacific maintained their preference
for European investment during the first quarter, particularly the biggest,
most liquid cities of Paris and London, concentrating on office and hotel
assets. The USD2.6 billion spent outside the region is 45 percent higher
than this time last year.
Alistair Meadows, director, International Capital
Group Asia Pacific, Jones Lang LaSalle commented: “New capital continues to
emerge from Asia Pacific that is aggressively targeting global cities,
especially London and New York. The sources of this capital are
increasingly Chinese sovereign wealth funds (SWFs) and insurance companies as
well as pension funds from Korea and Malaysia. Core office assets
in gateway cities remain the favoured targets, making up c.50 percent of global
Four Asia Pacific countries featured in the ten largest
markets globally in Q1 this year, Japan, China, Hong Kong and Australia.
Domestic investors accounted for the lion’s share of investment in all except
China, reflecting a trend seen across the region in the past quarter, as
investment from investors within the region has increased.
Japan stood out at USD10.6 billion, up 32
percent year on year and up 38 percent quarter on quarter, reflecting a broad
improvement in sentiment across the economy, with consumer confidence at a five
year high and a weaker yen that will help to support the large export
Hong Kong continued to see increased
levels of transactions; USD3.3 billion in Q1 is on par with Q4 2012 and up 68
percent year on year. However the doubling in stamp duty in late February
may result in a slowing of transaction volumes over the next couple of quarters
as buyers and sellers adjust expectations in the light of the additional tax.
China, with investment volumes of USD3.6
billion (up 62 percent quarter on quarter and flat year on year), was boosted
by a number of cross-border deals pushing the share of cross border
transactions to around 65 percent for 1Q 2013.
In Australia volumes were USD3.2 billion,
down 18% quarter on quarter but up 23 percent year on year, with cross border
deals down around a third both quarter on quarter and year on year with local
buyers active. Yields are compressing due to the weight of capital.
Five Asia Pacific cities made the top ten most active
cities globally, with Tokyo maintaining its number three spot (USD5.9 billion),
Hong Kong ranked fifth (USD 3.3 billion), Shanghai ranked sixth (USD2.4
billion) and Singapore ranked ninth (USD1.9 billion).
Four of the ten top ten purchasers globally by source of
capital were from the Asia Pacific region; whilst China’s Q1 2013 spend
remained on par with Q1 of last year, spending by Australia and Japan doubled
and Hong Kong spending globally was up by over 200% compared to this time last
Looking at cross-border purchasing countries (investors
buying real estate outside of their home market), Hong Kong, Singapore and
China featured in the top ten. Singapore was more subdued than the first
quarter a year ago, but institutional investors have on-going spending
requirements and have increased their allocation to real estate so are expected
to become more active through 2013.
There was a substantial increase in REIT purchasing
activity as we see the impact of looser monetary policies in Japan coming into
effect. This combined with the REIT sector in the US continuing to acquire
assets and confidence slowly returning to the smaller European REIT sector
pushed REITs to be the most active investor group this quarter – USD7.7 billion
compared to USD0.7 billion a year ago.
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