Commercial Property Investment

Commercial Property Investment In Asia Pacific Down 22%

ASIA PACIFIC – Data from Jones Lang LaSalle (JLL) showed that commercial real estate deals in the region dropped by 22 percent during the third quarter to US$21.3 billion (S$29 billion) on an annual basis, reported The Edge on Tuesday afternoon (14 November, SGT).

The property consultancy said this is the lowest quarterly figure since the April to June period of 2010. In a press release published on 14 November, JLL said the decline in commercial property investment is largely due to a continued fall in office and retail transactions.

“Despite a strengthening return to office narrative and low vacancy rates in many markets, investors remain generally more cautious on the office sector,” commented JLL’s Chief Executive for capital markets in Asia Pacific Stuart Crow.

“The high cost of debt has also exerted repricing pressures and most markets remain in price-discovery mode as investors adjust their targeted returns for acquisitions.”

In particular, commercial property transactions in Singapore slid by 11 percent year-on-year to US$2 billion in Q3 2023. Still, the city-state registered notable acquisitions in the hospitality and retail sectors during the period.

On the other hand, commercial real estate deals in Hong Kong rose 15 percent year-on-year to US$0.8 billion during the third quarter, with most activity comprising small lump-sum deployment of capital in strata-titled assets for owner-occupation.

JLL revealed that China was the most active commercial property market in Asia Pacific during the period under review, with investments sharply rising by 43 percent year-on-year to US$4.7 billion. Main recipients of capital in the country were industrial and logistics properties, together with assets suitable for research and development (R&D).

In contrast, commercial real estate in Australia plummeted by 47 percent year-on-year to US$3.8 billion in Q3, amidst a sluggish market, with fast changes in funding costs continuing to trigger price discovery for would-be investors.

“As we approach the end of 2023, investors will weigh the elevated cost of capital against an uncertain macroeconomic environment. With the Fed’s upcoming decision on adjusting interest rates, we can also expect investment activity to pick up as the cost of debt eases,” added JLL’s Head of investor intelligence for Asia Pacific, Pamela Ambler.

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