2013 capital markets in Asia Pacific – moving on upJanuary 31, 2013 / By
The capital markets for commercial real estate across Asia Pacific are set to grow 10 to 15% in 2013. Our forecast for the Asia Pacific regional total of investment transaction volumes is at USD 110 billion. This growth will be achieved by increasing capital targeting the real estate sector.
The big trends for 2013 will be the growth of institutional sources of capital and the rise of cross border investment, as investors continue to drive cash into real estate developing the global asset class. Low yields available on other investment classes, the potential for inflation picking up and the availability of new good quality building stock in Asia, makes real estate an attractive option. We recently released a Jones Lang LaSalle white paper at the Davos Conference in Switzerland last week on the topic. Click here to access.
We finished 2012 at a shade under USD 95 billion worth of commercial property bought and sold across Asia Pacific, down on 2011 figure of USD 98 billion. The short fall in volumes was almost entirely due to a fall in transactions in China in the second half of the year, leaving China down approximately 25 % on the year before as the measures introduced by the Chinese government to slow their economy took hold.
In 2013 we will see the traditional sources of capital looking cross border and the rise of new sources. US based and global funds are returning to Asia after a lull post GFC. Australian pension funds will venture off shore, Japanese funds will look at South East Asia and Singapore will grow as a conduit for capital round the region. New sources of capital looking at the region will be the rise of indigenous Asian pension funds and insurance companies looking to buy real estate as part of an investment portfolio, as rising middle classes channel their earnings into savings, pensions and insurance products.
To put some numbers round these trends; in 2012 cross border purchasers accounted for USD 19.7 billion in 2012, equivalent to 21% of all acquisitions. Four countries accounted for 80% of the regions cross border acquisitions; Australia attracted USD 6.5 billion, followed by Japan (USD 5.1 billion), China (USD 4.3 billion) and Hong Kong (USD 1.8 billion).
The potential is for the proportion of acquisitions bought by cross border capital to grow beyond the 15% market growth. Singapore was a standout source, with one third of all cross border capital deployed in Asia Pacific in 2012 coming from the city state, at over USD 6.5 billion. Other major sources of cross border capital included global investors (USD 2.4 billion), the US (USD 2.3 billion), Canada (USD 1.9 billion) and China (USD 1.65 billion).
Capital will be on the move in 2013, with more headed for AP real estate.