Asia Pacific commercial real estate investment volumes rise 3% in 4Q2023, says JLL

• Yulia Nikulicheva, Head of Research & Consultancy, JLL Malaysia noted that investors in Malaysia also initially adopted a cautious approach towards real estate at the beginning of the year, however “towards the end of the year, investment activity picked up significantly, surpassing both the volumes and number of transactions seen in the previous year”.

KUALA LUMPUR (Feb 19): Commercial real estate investment in Asia Pacific rose 3% year-on-year (YoY) in 4Q2023 to US$31.6 billion (RM151.1 billion), reversing seven consecutive quarters of decreasing volumes.  

According to data and analysis by JLL, the 4Q2023 “uptick in volumes provides some upside after a challenging year that saw overall investment across the region decline by 17% YoY to US$106.8 billion”.

China stood at the forefront of Asia Pacific’s investment rebound for the second consecutive quarter, recording a 50% YoY increase in volume to US$11.1 billion, stated global real estate consulting firm.

“Sectors such as logistics (down -5% to US$6.5 billion) and living (up 24% to US$1.5 billion) performed better than other sectors, especially in China.

Investments in office, down 13% YoY to US$13.7 billion, continued to contract amid uncertainties on interest rate movements, the extent of re-pricing and occupancy,” it added.

While China was the most active market in the fourth quarter, Singapore experienced the steepest decline in investment volume – falling 29% YoY to US$1.8 billion. “However, while cross-border investments in Asia Pacific declined by 64% YoY to US$3 billion in 4Q 2023, Singapore emerged as the most active cross-border investor, making large hotel and logistics acquisitions across the region and accounting for 36% of quarterly investment volume,” explained JLL.

Yulia Nikulicheva, head of Research & Consultancy, JLL Malaysia noted that investors in Malaysia also initially adopted a cautious approach towards real estate at the beginning of the year, however “towards the end of the year, investment activity picked up significantly, surpassing both the volumes and number of transactions seen in the previous year”.

Due to limited availability of standing assets for sale, a significant majority of transactions (57% by overall volume) involved the sale of land for future development. “Following that, logistics and industrial assets accounted for nearly a quarter of total transaction value, with offices coming in third at just 8%. In more traditional market segments such as offices and retail, we noticed only a few transactions, primarily involving Grade B assets. One noteworthy transaction that took place towards the end of the year was the sale of Oxley office Tower to Alliance bank,” Nikulicheva added.

Australia (US$4.3 billion) and Hong Kong (US$2.1 billion) both saw YoY improvements in investment volume, up 14% and 6% respectively. The improvement of the retail sector in Australia was the main contributor to higher investment volumes in the fourth quarter, while Hong Kong’s quarterly performance was bolstered by two sizeable office acquisitions made for occupation.

Investment volumes in Japan recorded a regression to US$4.4 billion, a 53% YoY dip, as concerns over the Bank Of Japan’s cessation of its negative interest rate policy impacted investor interest in office assets.

Despite a strong domestic capital bias in South Korea, large office transactions contributed to the market’s US$4.2 billion investment volume in 4Q2023 – which dipped by 7% YoY. While the leasing market held steady with low vacancy and positive rental growth, investment activities slowed down due to cautious investor sentiment.

“While the cost of debt remains elevated, investors across Asia Pacific are still erring on the side of caution. The prospect of interest rate cuts in 2024 may potentially reverse current trends, but we can expect greater sector diversification among investors – particularly towards sectors such as logistics and industrial and living, which have seen high investor conviction across the region,” said Stuart Crow, CEO, Asia Pacific Capital Markets, JLL.

“2023 concluded with a reduction in dry powder levels, indicating that investors deployed capital into the Asia Pacific commercial real estate market and were willing to take a long-term view in light of current market challenges. In 2024, challenges will remain with interest rate movements playing a decisive factor in investment activity and selling pressure mounting in some of the region’s bigger markets,” said Pamela Ambler, head of Investor Intelligence, Asia Pacific, JLL.

“Looking ahead, we maintain an optimistic outlook for market activity, aligning with positive macroeconomic expectations. We are observing the keen interest of both international and domestic investors who are carefully evaluating opportunities across all sectors. In the first quarter of 2024, we anticipate the potential occurrence of notable transactions in Malaysia,” stated JLL.

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