Real estate investment in the Asia-Pacific rose by 14% in the first quarter of 2019 to $45 billion, helped by deleveraging in China and flows of cross-border capital, according to a report by global real estate consultant JLL.
China accounted for close to 40% of Asia-Pacific transaction volumes between January and March. At $17 billion, that was more than double the amount for the same period in 2018, JLL said on Thursday. The increase was helped by the $1.6 billion sale and leaseback agreement between China online retailer JD.com and Singapore sovereign fund GIC, as well as Swiss private equity firm Partners Group’s $1.3 billion acquisition of Beijing’s Dinghao Plaza from Sino Horizon Holdings. JD is led by billionaire Richard Liu; Sino Horizons is controlled by the family of Taiwan billionaire Jason Chang.
“The Chinese government’s focus on deleveraging has impacted the availability of credit for local borrowers and pushed some owners to divest assets in order to reduce debt,” said Stuart Crow, CEO of Asia Pacific Capital Markets at JLL, in a statement. Foreign investment into China accounted for nearly half of its transaction volumes, mostly from Singapore, the U.S. and global private equity firms, JLL said.
Foreign buyers invested $2.6 billion in Shanghai, making it the second largest recipient of cross border capital globally, JLL said. Shenzhen, which is ranked 10th, drew close to US$1 billion in foreign investment.
“We foresee that financial institutions will further accelerate demand and become a major driving force in Shanghai’s leasing market over the next six to 12 months,” Crow said. Shenzhen investors anticipate growth in connection with China’s Greater Bay Area development initiatives, he said.
In other major Asian markets, South Korea investment rose by 28%, JLL said. Singapore, meanwhile, gained 71%, driven by investment across a range of sectors including industrial, hotel and retail.
“Investor interest in Singapore remains high, bolstered by the upbeat outlook for its commercial leasing market,” Crow said. JLL believes transaction volumes this year should surpass last year’s, helped by potential multi-billion dollar deals such as Chevron House, DUO Tower and the US$6.6 billion expansion of Resorts World Sentosa and Marina Bay Sands.
Elsewhere in the region, Japan, Australia, and Hong Kong experienced a decline in year-on-year investments. Despite the fall in overall volumes, Tokyo remained the most active city in the world in terms of transactions in the first quarter of 2019. Nearly 83% of real estate investments were driven by domestic groups, primarily corporates and J-REITs, JLL said.
Australia’s slowing domestic economy, declining residential prices and uncertainties surrounding the approaching federal elections, dampened investor confidence, leading to a downward trend across a number of industries, including retail, said JLL.
Given the U.S. Federal Reserve’s likely freeze on rate hikes this year, investor sentiment in Hong Kong has rebounded, with buyers purchasing retail assets located beyond traditional core districts, JLL said. A recent notable deal is PAG’s reported $1.5 billion acquisition of Mapletree Bay Point in Kwun Tong from Singapore’s Mapletree Investment, it noted.
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