Asia Pacific sets new commercial real estate transaction volumes record

January 20, 2014 / By  

If you thought you were busy on deals last year, you were right; commercial real estate transaction volumes in Asia Pacific set a new record in 2013 – reaching USD 126.8 billion, surpassing the previous record set in 2007 at USD 120.5 billion.

Investment volumes surged 29% on the previous year, with record breaking volumes for full year 2013 in China and Australia, and volumes doubling in Japan in yen terms. Investment activity has been buoyed by the on-going improvements in both debt and equity markets, heightened liquidity across the asset class and higher allocation to the real estate sector from multi-asset managers.

Momentum was with the market across the year and is expected to continue through 2014. Across 2013, every quarter recorded an improvement on their corresponding period in 2012, culminating in record breaking final quarter where volumes reached USD 37.2 billion, the highest single quarter since 3Q07.

In the opening weeks of 2014, deals have already been recorded by our Jones Lang LaSalle capital markets teams and work in progress points to a robust first quarter. Our forecast is for transaction volumes to rise a further 10% to USD 140 billion in 2014.

Going around the countries; Japan led with the full year at USD 41.7 billion, up 67% on 2012 and coming in at USD 12.2 billion in 4Q 13. China and Australia volumes were the highest on record. In China volumes were at USD 25.1 billion, up 71% on 2012 finishing strongly in 4Q13 to a record USD 8.5 billion. Australia’s volumes reached USD 6.4 billion in 4Q, up 62% y-o-y and full year at USD 21.9 billion, up 33% on 2012.

Elsewhere Singapore also set a record on a couple of very large deals, up 40% on 2012 at USD 11.8 billion. In Hong Kong, government measures to cool the market have been effective with volumes down 35% on 2012 at USD7.3 billion. Whilst South Korea was slow down 36% on 2012.

The equity raising environment is positive, leaving an abundance of capital chasing assets. Equity raised by Asia Pacific REITs also reached a new record in 2013 at over USD 20.1 billion, almost double the level seen in 2012. Private funds have also been active with equity raised in 2013 reaching USD 11 billion – up from USD 6.4 billion in the previous year. A number of investors have also highlighted their intentions to make fresh commitments in 2014. With such an abundance of capital chasing assets, investors are starting to move up the risk curve in order to execute deals.

Interest rates across Asia Pacific have also been less reactive to the reduction in US Fed asset purchases announced in December, when compared to the response following the announced plans back in May 2013. Swap rate and benchmark sovereign bond yields are relatively unchanged from late December.

The lower for longer interest rate environment, together with momentum in the market and capital already raised and yet to be deployed points to a busy and prosperous new year for 2014.

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