The investment in commercial real estate within Asia Pacific (Apac) clocked at US$27 billion ($36 billion) in the 1Q2023 according to the data collected by the global real estate consulting firm JLL. This is 30% decrease in y-o-y compared to 1Q2022.
Pinetree Hill condo price of $671.5 million, equivalent to $1,318 per square foot per plot ratio (psf ppr). The price was $800 more than the second bid among the five bids submitted for Pinetree Hill, Making it the closest tenders since it had a difference of only 0.0001%.
The decrease in investment volumes is due to the headwinds of interest rates, as well with price adjustments for assets according to JLL. “The market is still difficult for investors, with many thinking that tightening lending regulations will create more uncertainties for the market for commercial real estate” states Stuart Crow, JLL’s CEO capital markets division, Asia Pacific.
The majority of the region experienced smaller volumes, with the exception of Singapore that saw the 66.8% y-o-y decline to US$1.9 billion. South Korea saw a 69.5% decline in y-o-y to US$2.5 billion. China investment volume decreased 16.4% y-o-y to US$6.9 billion, and Australia reported an 25.6% y-o-y fall to less than $6,000 billion.
Japan was the only Apac country to witness an increase in the volume of investment increasing 4.7% y-o-y to US$8.9 billion. “The Japanese office market saw a significant increase in volume which was supported by the disposal of headquarter buildings from Japanese corporations, as well as an influx of acquisitions by J-REITs” JLL’s report claims.
The drop in Apac investment volume in the 1Q2023 was felt across all industries. Office market investment fell 26.6% y-o-y to $12.7 billion in the first quarter of 2018, which JLL declares to be one of the weakest quarters in history. In the same way, investments in the industrial and logistics sector decreased by 24% in a year-on-year basis, as there were fewer $100 million+ transactions decreased because of an ongoing pattern of discovery and financing issues.
In the retail industry the investment volume was US$5.3 billion in the 1Q2023 less than the five-year average quarterly which was US$7.5 billion. In addition, there was Singapore that witnessed transactions in the retail sector, such as the purchase of fifty% share of Nex retail malls from Mercatus Co-operative to Frasers Property and Frasers Centrepoint Trust for $652.5 million — major shopping mall transactions were absent from the other regions.
In contrast, despite a significant growth in the hotel industry hotels reported US$2.4 billion of investments in 1Q2023, which was down 30% from a year ago. “Ongoing macroeconomic issues as well as the current US and European financial crisis have significantly affected hotel transactions in Apac in the first quarter of this year.” JLL highlights.
But JLL’s Crow remains positive regarding what’s to come in the Apac commercial real property market. “Asia Pacific is more protected and we’re convinced that liquidity risk is controlled within the region. The return of activity is dependent on the time rather than the case.”
Pamela Ambler, head of the investor research department of Apac at JLL says that, within the current cycle of price adjustments that is taking place across the globe, she doesn’t think that the prices in Apac to change significantly. “We believe that the amount of repricing to reach its peak at the end of this year’s second quarter, and then to decrease towards the end of the part of the year, as the cost of borrowing is expected to decrease, leading to the possibility of rate cuts in the future,” she says.
According JLL, over the last one year Apac adjustment of prices has fallen behind other countries like the US where asset prices have dropped by 20% up to 40% in comparison to the early 2022 prices as well as Europe where the majority of investors have experienced cap rate increases of between 100 and 150 basis points. “Pricing dynamics are more complex across Asia and the most pronounced softening is noticeable within Australia (15%-20%) and South Korea (10%-15 %),” the report says.