Asia-Pacific real estate investment growth dips in Q3 amid cautious sentiment: JLL
REAL estate investment volumes for the third quarter of 2022 have softened from a year ago under the influence of a variety of macroeconomic factors which have prompted investors to adopt a more cautious approach to capital deployment.
According to a report by real estate services firm JLL on Tuesday (Oct 18), investment volumes were down 29 per cent on-year at US$28 billion in Q3.
This was attributed to a combination of fewer trades in major markets; rapid currency depreciation against the US dollar; and a rising cost of debt sparked by the aggressive tightening of interest rates in the US.
Despite such challenges and concerns, JLL’s chief executive of capital markets for Asia-Pacific, Stuart Crow, observed that investors appear “broadly positive” on the real estate space and maintain medium- to longer-term plans to continue expanding their footprint in the region.
The overall fall in volumes this quarter were mainly contributed by Japan, China and Hong Kong, which booked respective year-on-year declines of 61 per cent, 55 per cent and 75 per cent.
In Japan, weak activity across most sectors were exacerbated by a depreciating yen – while China faced a continued decline in volumes due to the lingering impact of Covid-19 policies. Hong Kong also saw fewer en-bloc transactions and felt the broader impact of external factors.
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JLL deemed Korea’s 8 per cent year-on-year decline in transactions “modest”, highlighting the market as one of the region’s “most resilient” in the third quarter.
Real estate investment activity was however robust in Singapore, which saw a 116 per cent hike in volumes on large office transactions compared to a low base in the corresponding period in 2021. Activity in Australia was also up 15 per cent on-year due to several high-profile office transactions in Sydney and Melbourne.
Sector-wise, office as well as logistics and industrial transactions declined by 33 per cent and 52 per cent, respectively. The office space was influenced by sluggish volumes in Japan and China, said JLL, as sentiment softened amid a widening price gap between buyers and sellers. Meanwhile, logistics and industrial markets were also among the several affected by rate hikes and the rising cost of debt.
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JLL noted that retail investment remained “muted”, declining 13 per cent on dampened consumer sentiment and a weaker discretionary spending outlook leading up to less investor interest.
The hotel sector was notably Asia-Pacific’s most consistent performer this quarter, reaching US$8.4 billion in the year to date as international and domestic tourism recovery continued to attract both global and regional investors to the asset class.
Pamela Ambler, JLL’s head of investor intelligence for Asia-Pacific, said the softening of overall third quarter volumes was “not surprising” in view of a high transaction base in 2021 in combination with economic, policy and geopolitical factors.
“Investors are understandably treating capital deployment strategies differently given the fluid external environment, and we’ll likely see some decision delays in the fourth quarter while awaiting more market clarity on the state of the global economy,” commented Ambler.
“In the interim, we expect the level of repricing to sharpen and the price discovery phase to extend throughout next year.”
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