Asia-Pacific property investment down 17% in H1 as tightening rate cycle, inflation hit deals
Vivienne Tay
REAL estate investment in Asia-Pacific dropped 17 per cent on the year in the first half of 2022, as deal activity in several of the region’s major economies moderated from a high base in 2021.
Direct real estate investments in the region totalled US$70.9 billion in the 6-month period as a tightening rate cycle, and inflationary concerns started affecting the number of transactions in the later months, according to JLL’s Q2 2022 capital tracker.
Investors had adjusted their capital deployment strategies to align with a more aggressive rate tightening cycle, said JLL Asia-Pacific chief executive of capital markets Stuart Crow.
Office properties remained the most liquid asset class, raking in US$30.6 billion in investments in H1 2022. Compared to industrial and logistics investments (US$14.6 billion), which tumbled 37 per cent, Asia-Pacific office transaction volume only fell by 8 per cent.
Deployments into retail assets (US$14 billion) declined by 31 per cent, while investments into alternative assets (S$1.4 billion) like data centres dropped 12 per cent.
Despite the drop in global activity, fundraising dedicated to the Asia-Pacific region continued to gain ground. Development-focused funds in logistics, living, data centres, India and South-east Asia continue to obtain financial commitments from global and regional institutional investors.
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Singapore and Hong Kong were the only markets to register a growth in transaction volume. Other than South Korea, which was flat, most markets in the region saw deal activity drop.
South Korea emerged as the region’s largest market by volume in the first half. This was mainly due to office transactions including SK U-Tower and A+ Asset Tower in Seoul.
Singapore registered about US$9.3 billion in investment, growing 81 per cent year on year on big ticket office and mixed-use transactions including Income@Raffles. Meanwhile, a number of en bloc industrial sales helped Hong Kong’s deal activity rise by 18 per cent, bagging a total transaction volume of around US$5 billion.
China, which continued to be weighed by pandemic-influenced lockdowns, saw investment volume contract 39 per cent to US$14.1 billion. Japan, which saw a lack of logistics transactions, dropped 33 per cent in the first half.
“Capital remains committed to the Asia-Pacific real estate market, but deployments will be more selective as investors play the long game and price in financial market tightening to any investments for the foreseeable future,” noted Pamela Ambler, JLL Asia-Pacific’s head of investor intelligence and strategy, capital markets.
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