Q1 commercial property deals highest since 2008

Volumes came in at US$105 billion (Bt3.1 trillion) for the first quarter of 2013, with all three regions (Asia-Pacific, the Americas and EMEA, or Europe, the Middle East and Africa) witnessing growth year on year, as the weight of money chasing real estate has increased significantly.
A total of $27 billion was invested directly in Asia-Pacific commercial real estate in the quarter, which was on par with the fourth quarter of last year, but up 26 per cent on the first quarter of 2012. Asia-Pacific was the only region not to see a decline in volumes transacted compared with the fourth quarter of 2012.
An increased proportion of transaction volumes in the Asia-Pacific region was made up of domestic deals ($20 billion), with cross-border investment ($7 billion) down 24 per cent year on year and down |11 per cent quarter on quarter.
Stuart Crow, head of Asia-Pacific capital markets at Jones Lang LaSalle, a real-estate services firm, said that continued quantitative easing globally was increasing liquidity and reducing the cost of debt in Asia and the Pacific, which is making real-estate assets more accessible to investors within the region.
“We maintain our expectation of an increase in transaction volumes in Asia-Pacific to $110 billion for 2013, which will be about 12 per cent up on last year, and we think that Japan is going to be the ‘one to watch’ this year. We expect a lift in investment activity in the country, as positive signs are emerging following announcements about stimulus measures targeted at reflating the Japanese economy,” he said.

ON THE GLOBAL STAGE
Investors from Asia and the Pacific maintained their preference for European investment during the first quarter, particularly the biggest, most liquid cities of Paris and London, concentrating on office and hotel assets. The $2.6 billion spent outside the region is 45 per cent higher than this time last year.
Alistair Meadows, director of the firm’s international capital group for Asia-Pacific, commented: “New capital continues to emerge from Asia-Pacific that is aggressively targeting global cities, especially London and |New York.
The sources of this capital are increasingly Chinese sovereign wealth funds and insurance companies as well as pension funds from Korea and Malaysia.
“Core office assets in gateway cities remain the favoured targets, making up 50 per cent of global cross-border activity.”
The research said that four Asia-Pacific countries or regions featured in the 10 largest markets globally in the first quarter of this year: Japan, mainland China, Hong Kong and Australia.
Domestic investors accounted for the lion’s share of investment in all except mainland China, reflecting a trend seen across the region in the past quarter, as investment from within the region has increased.
Japan stood out at $10.6 billion, up 32 per cent year on year and up 38 per cent quarter on quarter, reflecting a broad improvement in sentiment across the economy, with consumer confidence at a five-year high and a weaker |yen that will help to support the large export market.
Hong Kong continued to see increased levels of transactions; US$3.3 billion in the first quarter is on par with the fourth quarter 2012 and up 68 per cent year on year. However, the doubling in stamp duty in late February may result in a slowing of transaction volumes over the next couple of quarters as buyers and sellers adjust expectations in the light of the additional tax.
Mainland China, with investment volumes of $3.6 billion (up 62 per cent quarter on quarter and flat year on year), was boosted by a number of cross-border deals pushing the share of cross-border transactions to about 65 per cent for the first quarter of 2013.
In Australia volumes were US$3.2 billion, down 18 per cent quarter on quarter but up 23 per cent year on year, with cross-border deals down by around a third both quarter on quarter and year on year with local buyers active. Yields are compressing because of the weight of capital.
Meanwhile, five Asia-Pacific cities made the top 10 most active globally, with Tokyo maintaining its No 3 spot ($5.9 billion), Hong Kong ranked fifth (US$3.3 billion), Shanghai ranked sixth ($2.4 billion) and Singapore ranked ninth (US$1.9 billion).
Four of the top 10 purchasers globally by source of capital were from the Asia-Pacific region. While mainland China’s spending remained on par with the first quarter of last year, spending by Australia and Japan doubled and Hong Kong spending globally was up by more than 200 per cent compared with this time last year.
Looking at cross-border-purchasing countries and regions (investors buying real estate outside of their home market), Hong Kong, Singapore and mainland China featured in the top 10. Singapore was more subdued than the first quarter a year ago, but institutional investors have ongoing spending requirements and have increased their allocation to real estate, so are expected to become more active through 2013.
There was a substantial increase in purchasing activity for real-estate investment trusts as the impacts of looser monetary policies in Japan came into effect.
This combined with the REIT sector in the United States continuing to acquire assets and confidence slowly returning to the smaller European REIT sector pushed such trusts to be the most active investor group this quarter, at $7.7 billion compared with $700 million a year ago.