Investment activity ahead of expectationJuly 30, 2013 / By
Asia Pacific investment activity reached USD 59.7 billion in the first half of 2013, up 21% compared to the same time last year, coming in ahead of expectation. Growth is being driven by the larger markets in the region with Japan, Australia and China all performing well. Domestic groups, particularly the REITs have been active and are being supported by high interest coverage ratios, a lower cost of debt and new capital sources which has improved their competitive positioning and afforded them considerable dry powder for yield accretive acquisitions.
We also continue to witness a trend of offshore groups investing via separate accounts managed by global funds with capital being sourced from South Korea, US, Canada and the UAE.
Around the region, Japan surprised on the upside in 1H13, posting 50% growth to USD 10.2 billion. Renewed market confidence and stimulatory measures have supported J-REIT prices and investment activity as well as resurgence in IPO activity. Rents have shown some signs of early growth and are up 4.7% over the past year, the fastest growth rate since early 2008.
Australia continues to attract capital from both domestic and offshore groups, particularly via separate account funds and joint venture structures. A number of large deals were concluded during the quarter highlighting continued demand from both offshore and domestic institutional investors and pension funds, with cross border purchasers accounting for 25% of total acquisitions.
China’s capital markets bounced back to USD 6 billion from 3.6 billion in the first quarter. Despite macro concerns and the recent episode of interbank rate volatility, foreign buyers continued to execute, accounting for around 30% of overall deals. The markets in Hong Kong have suffered somewhat following cooling measures introduced by the government with investment volumes down 53% in 2Q13 to USD 1.5 billion. Singapore improved on 1Q13 by 21% to reach USD 2.3 billion. The market seems to have passed its cyclical trough with office rents recording growth for the first time since 2011. Improved market fundamentals and a number of large deals that are currently in advanced stages of negotiation should support investment volumes over the remainder of the year.
The outlook for the remainder of the year is positive and we remain optimistic in reaching our 2013 forecast of USD 110 billion.