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Asia Pacific property investment volumes fall 29% in 3Q2022: JLL

/ EdgeProp Singapore |

October 18, 2022 2:25 PM SGT

A total of US$28 billion in direct real estate investments were recorded during the quarter (Picture: Albert Chua/The Edge Singapore)

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SINGAPORE (EDGEPROP) - Real estate investment volumes in Asia Pacific (Apac) slowed down in 3Q2022, according to research by JLL. A total of US$28 billion ($40 billion) in direct real estate investments were recorded during the quarter, a y-o-y decline of 29%.

JLL notes that the lower investment volume comes on the back of “a variety of macroeconomic factors”, including fewer trades in major markets, Apac currencies appreciating against the US dollar, and aggressive tightening of US interest rates. Given these factors, Pamela Ambler, JLL’s head of investor intelligence, Asia Pacific, says the softer volume in 3Q2022 is “not surprising”, adding that it comes off the back of a high transaction base in 2021.

Stuart Crow, JLL’s CEO, capital markets, Asia Pacific, adds that investors active in Apac have become more cautious in terms of capital deployment, given the changing conditions in global real estate markets.

Nonetheless, he believes investors have a hopeful overall outlook. “Despite the ongoing macroeconomic challenges, inflationary concerns, and the rising cost of debt, investors remain broadly positive on Apac real estate and maintain medium to longer-term plans to continue to expand their footprint in this region,” Crow observes.

In Singapore, investment volumes for 3Q2022 totalled US$2.3 billion, easing from US$3.6 billion reported in the previous quarter. JLL attributes the decline to extended negotiations on major office deals as a result of widening price gaps between buyers and sellers. However, the volume represents a 116% improvement y-o-y, coming off of a low base in 3Q2021.

Elsewhere, Japan saw a 61% y-o-y decline in investment volumes to US$4.6 billion in 3Q2022. Hong Kong's investment volume dipped 75% y-o-y to US$720 million, while China logged a 55% y-o-y decline to US$3.3 billion, underpinned by the lingering impact of Covid-zero measures.

In contrast, investment activity remained robust in Australia, which logged US$7.3 billion in real estate investment. The 15% y-o-y increase was driven by office transactions in Sydney and Melbourne. South Korea also remained relatively resilient, declining by 8% y-o-y to register US$6.4 billion worth of deals.

In terms of sectors, office transactions in Apac moderated to US$14.4 billion, representing a y-o-y decline of 33%. JLL attributes this to “sluggish” volumes in Japan and China, coupled with softer sentiment amid a widening price gap between buyers and sellers.

Logistics and industrial transactions saw a 52% y-o-y drop in volumes to US$4.6 billion, underpinned by price corrections prompted by rate hikes and the rising cost of debt. Retail investment was also muted in 3Q2022, declining 13% y-o-y to US$4.5 billion.

The hotel sector was the region’s best-performing sector, increasing 16% y-o-y to reach US$8.4 billion in transaction volumes, buoyed by easing travel and social restrictions.

Looking ahead, Ambler anticipates investors will delay investment decisions in the fourth quarter while awaiting more market clarity on the state of the economy. “In the interim, we expect the level of re-pricing to sharpen and the price discovery phase to extend throughout next year,” she adds.

To that end, JLL is forecasting 2H2022 Apac investment activity to decline 12% to 15% relative to 1H2022. For the full year, it expects transaction volumes to contract 25% y-o-y.

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