Asia Pacific Investment Market Update October 2010

21 October, 2010

Commercial real estate transaction volumes in Asia Pacific increased by 8% in the third quarter of 2010 to US$29.6bn, according to the latest ‘Investment Market Update’ report from DTZ Research. This upward trend is set to continue for the remainder of 2010 and into next year with investment volumes predicted to reach US$145bn in 2011, a 12% increase on the forecast of US$129bn for 2010.

The report launched today, reveals that the established markets of Australia and Hong Kong both recorded third quarter investment increases of over 40% to US$4.3bn and US$1.7bn respectively. Volumes in Japan also increased 25% quarter-on-quarter to US$4.7bn. Investment volumes in Malaysia reached a record high of US$1.9bn in Q3 representing a 233% improvement on the second quarter, assisted by large property acquisitions of retail assets by domestic REITS. In Singapore, volumes surpassed the US$3bn mark last seen in 2008.

The Investment Market Update highlights that the additional restrictions imposed by the Chinese Government in the residential sector have continued to impact on commercial real estate investment with volumes in China continuing to fall, decreasing 21% to US$11.9bn in the third quarter. However, the decline has slowed since the last quarter and China still remains the most liquid market in Asia Pacific, accounting for 40% of overall activity in the third quarter.

David Green-Morgan, Head of DTZ Asia Pacific Research, said: “Despite the continuing slow down in bank lending in China, transactional activity around the region continues to improve with investors now starting to look outside their own domestic markets for opportunities.”

Tony McGough, Global Head of DTZ Forecasting & Strategy Research, comments: “Our report shows that improving confidence in the regional economy has boosted investment activity across the majority of Asia Pacific markets resulting in record increases in Malaysia and Singapore. Furthermore, our recent report, ‘The Great Wall of Money’, estimates that US$71bn of new capital will target the region in 2011. Combined with the positive economic outlook, we expect investment volumes to reach US$145bn in 2011.”

The DTZ report shows that the value of retail transactions reached a record US$9.9bn, an increase of 56% on quarter two volumes, surpassing office transactions for the first time. Significant activity included the sale of the Seibu Ikebukuro department store in Japan (US$1.4bn) and the Sunway Pyramid Shopping Mall in Malaysia (US$729m). Despite trailing the retail sector, office transactions increased by 20% to US$8.2bn whilst transactions of industrial assets increased by 8% to US2.3bn. Mixed use property schemes registered a 30% decline on the US$11.5bn recorded in Q2 2010, mainly in China.

Domestic investors continued to dominate purchasing activity in the third quarter of 2010 accounting for 89% of overall investments, although this was down from 91% in Q2. Intra-regional investors showed a preference for domestic assets, reducing activity to US$1.4bn, nearly a third less than the second quarter of 2010.

Green-Morgan, said: “The economic outlook for Asia Pacific remains optimistic with capital and rental values predicted to increase across nearly all markets during 2011. We expect institutions to become increasingly significant in the region particularly sovereign wealth and pension funds.”

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