Asia Pacific commercial real estate investment volumes reached record levels in 2010

20 January, 2011

Commercial real estate transaction volumes in Asia Pacific for 2010 reached US$145bn, almost double the US$73bn achieved in 2009 according to the latest ‘Investment Market Update’ report from DTZ Research. Despite a slight fall in investment volumes during Q4 2010, down 2% to US$37bn from US$38bn in Q3, the market is expected to remain buoyant during 2011 with investment volumes forecast to reach US$155bn.

The report launched today, highlights the increasing maturity of the investment market in Asia Pacific with the 2010 total of US$145bn exceeding the previous 2007 peak of US$101bn. The increase in activity by pension funds, sovereign wealth funds and major corporations reveals that institutional investors are increasingly looking towards commercial real estate as a key component of their asset collection.

The Investment Market Update, reveals that during Q4 2010, investment activity across the region was lower in the majority of countries apart from China, Singapore and Thailand. The cooling measures introduced by the Chinese government in Q2 continue to have an impact on transaction volumes, with activity in China only increasing by 3%. However, China remains the most liquid market in Asia Pacific, comprising 50% of all activity in the region during Q4. Transactions in Singapore doubled from Q3 2010, boosted by two major deals worth over US$1bn each. Activity in Thailand increased by over 2000% compared to Q3 as a result of a significant retail portfolio deal worth US$1.1bn.

Mixed use schemes continued to be the most popular sector during the fourth quarter of 2010, up 24% from Q3 2010 and comprising 50% of all activity. This is in line with the past two years which have seen over 44% (US$95bn) of all investment activity relating to mixed use schemes. Individual retail and office transactions remained the next most popular sectors amongst investors although both fell marginally during the last quarter.

The report shows that domestic investors continue to dominate purchasing activity, accounting for 88% of overall transactional activity. However, for the first time in two years non-domestic activity exceeded 10% in the fourth quarter.

David Green-Morgan, Head of DTZ Asia Pacific Research, said: “During the last quarter of 2010 we saw a further increase in inter-regional investment transactions, testament to the fact that fund managers from outside Asia Pacific are increasingly looking to extend their presence in the region. However, domestic activity still dominates the picture, typified by the recent sale of two thirds of Singapore’s Marina Bay Financial Centre to Singapore REITs worth over US$1bn. Furthermore, during the first half of 2011 we expect countries within the region - predominantly China and India, to be the main drivers of economic activity boosting exports from Japan, South Korea and Australia.”

Tony McGough, Global Head of DTZ Forecasting & Strategy Research, comments: “The long term economic prospects for Asia Pacific are positive and we predict that 2011 investment volumes will slightly exceed 2010 levels to reach US$155bn. As seen in our latest ‘Great Wall of Money’ report, the amount of available global capital targeting Asia Pacific is forecast to increase by 29% in 2011, with increasing levels of activity expected from overseas investors.”

David Green-Morgan, concludes: “The prospect of rising interest rates in the larger Asia Pacific economies will make commercial property investment more challenging, however, the opportunities for growth that exist in the region will continue to drive forward significant investment throughout 2011.”

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