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Asia Pacific real estate transaction volumes up in third quarter 2016, says JLL data

China outperforms rest of the region; Singapore sees increased investor confidence


​SINGAPORE, 28 OCTOBER 2016 – Transaction volumes in the three months ending September reached US$33.1 billion, according to JLL’s latest Global Capital Flows data. For the first nine months of the year, regional transaction volumes totalled US$86.6 billion, little change compared with the same period of 2015. 

Cross-border investors were active on both sides of the ledger, accounting for around 30 percent of the volumes during the quarter.

“Intra-regional purchaser capital flows within Asia Pacific trended slightly higher in the first nine months of 2016, as Asian investors preferred markets closer to home. However, capital flows by inter-regional purchasers fell over the same period,” says Dr. Megan Walters, Head of Research, Asia Pacific at JLL.

China continues to attract investors

China was the outperformer in Asia Pacific with third-quarter transaction volumes reaching US$9.8 billion, up 45 percent on the same period last year. Deal volumes were supported by several nationwide asset sales by local firms. Domestic buyers were active in Tier I cities and aggressive on asset pricings. Despite competition from online retailers, investors continued to be attracted to successful retail projects. A notable example was Chongbang Group paying over US$ 500 million to buy back an 80 percent stake in the Jinqiao Life Hub project in Shanghai. 

Hong Kong registered strong quarter-on-quarter volume growth. Deal volumes in the third quarter were 56 percent higher compared with levels in the previous quarter. Mainland Chinese corporates dominated transactions. Investors continued to favour en-bloc office properties as Chinese demand supported rents. High pricing recorded in recent land sales and office deals will likely lead to a reset of sales pricing benchmarks in the near term.

Active quarter for Singapore and South Korea

Singapore’s deal volumes climbed 61 percent year-on-year in the third quarter supported by a string of commercial property transactions. “We are seeing increasing investor confidence in the medium-term office market outlook, buoyed by healthy take-up in new supply,” says Greg Hyland, Head of Capital Markets, Singapore at JLL. “There is also improving sentiment in the residential sector, with evidence of a market bottom forming in the luxury segment.”

In South Korea, deal volumes in the first nine months were 49 percent higher compared with the same period a year ago. “Some Korean corporates tried to improve their financial positions by selling non-core buildings with leasebacks,” says Steven Craig, Managing Director, Korea at JLL. “At the same time, core funds with plentiful liquidity were searching for yields, outweighing anxiety from weak occupier market outlook.”

Owners hold stock in Japan and Australia

In Japan, total volumes reached US$ 8.7 billion in the third quarter, accounting for 26 percent of total Asia Pacific volumes, in part due to a strong yen, which appreciated 19 percent over the past year. Deal volumes in the first nine months of the year fell 18 percent year-on-year in yen terms but based on USD, transaction volumes were down just 9 percent. “There were fewer opportunities in the market, as negative interest rates continued to prompt landlords to refinance their assets instead of selling them,” says Akihiko Mizuno, Head of Capital Markets at JLL Japan.

Similarly, Australia’s volumes in the first nine months of the year were 9 percent lower compared with the same period last year as owners held on to stock given limited reinvestment opportunities. However, interest from both domestic and international investors remained strong, as relatively high spreads and the prospect of above-trend office rental growth attracted buyers. Commercial properties continued to be  highly sought after, as evidenced from unprecedented levels of bids for assets in Sydney and Melbourne.

Going forward, JLL expects the region’s markets to stay resilient and real estate assets to remain attractive, compared to other asset classes, in times of political and economic uncertainty. Despite slower growth year-to-date in fundraising by AP-focused funds, dry powder remained at record levels and needed to be deployed. “We see continued institutional appetite for real estate in the region but finding value is challenging. From a business perspective, we expect steady deal flows in the next 12 months but ongoing stock shortage,” says Stuart Crow, Head of Asia Pacific Capital Markets at JLL. “As a result, investors will increasingly look for value in off-market deals, newer or secondary cities as well as newer sectors.”

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About JLL 

JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $59.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.​

JLL has over 50 years of experience in Asia Pacific, with 34,000 employees operating in 92 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016 and was named number one real estate advisor in Asia at the 2015 Euromoney Real Estate Awards.  www.ap.jll.com.