Asia Pacific real estate investment dipped 20% in 2020 – report

PETALING JAYA (Feb.11): Asia-Pacific real estate investment volume declined 20% in 2020 but was supported by a recovery in the final quarter, with transaction levels unchanged from a year earlier.

North Asian markets were the most resilient in the fourth quarter, according to JLL Capital Tracker. Japan recorded transaction volume growth of 37% in the fourth quarter of 2020 compared to the previous quarter. China and South Korea also saw higher Qoq transaction volumes, growing 21% and 16% respectively.

Investments in logistics and apartment buildings rose by 29% and 26% respectively in the reporting period. These asset classes made up almost 30% of the total, which shows how attractive they are to investors. In comparison, hotels, retail and office transactions were hardest hit, down over 25% year over year.

“According to JLL research, Covid-19 impacted real estate investments, demand, rents and net present values ​​in the Asia-Pacific region in 2020.” Nevertheless, the logistics sector remains robust. In the first half of 2020, total real estate transaction volume in the Asia-Pacific region was down 32% year-over-year, but logistics transactions reached $ 11.1 billion (RM 44.9 billion), only 6% below the prior-year figure. “Says YY Lau (pictured), Country Head of JLL Property Services (M) Sdn Bhd.

“Logos has formed a new joint venture with CPPIB and has raised $ 200 million to expand its presence in Southeast Asia,” added Lau.

“Investors have no doubt faced a challenging operating environment in 2020, but our interactions have confirmed that they have realigned their strategies and reaffirmed their commitment to the region. With transactions nearing pre-pandemic levels in the fourth quarter, we expect investor confidence to increase in 2021 as capital adjusts and longer-term opportunities in the region clear, “says Stuart Crow, CEO of Capital Markets, Asia Pacific, JLL.

JLL predicts that Asia-Pacific real estate investments will continue to rebound in 2021, with direct transactions increasing 15-20% year over year. Alternative asset classes such as logistics, apartment buildings and data centers are likely to drive investment activity this year. Office, retail and hotel investment businesses are expected to grow in line with economic growth.

In the coming years, the prospect of a longer period of low yields and low interest rates is likely to further compress returns for various asset classes, says JLL. As a result, logistics facilities in most cities are expected to generate higher returns than office facilities, but have lower income volatility. Additionally, lower borrowing costs offer wide spreads to offset lower rental growth.

“In a world of low growth and low rates, sectors with higher returns and historically lower rental growth may become more attractive, and we expect logistics, data centers, and apartment buildings to benefit from increased capital allocation. While most investors are still under-allocated to these sectors, we expect these classes to become a central part of their portfolios over the next few years. Another theme in 2021 could be a shift in asset allocation towards more opportunistic and value-adding strategies. “Says Regina Lim, Head of Capital Markets Research, Asia Pacific, JLL.

Office real estate remains the core of most investors, but JLL expects that with the demand for flexible space, more value creation strategies will emerge and healthier buildings with more collaborative space will increase. The majority of the Asian occupiers have returned to the office, but JLL estimates that remote working will increase by one day per week.

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