Real estate to see sharp rise in direct investment

While transaction volumes in the third quarter of 2014 were up just 1 per cent over the same period last year, at US$30.3 billion, JLL has identified more than $200 billion worth of capital available for investment in the Asia Pacific real estate market in 2015.

Activity is expected to gather pace throughout the final quarter of 2014, with year-end volumes set to reach $120 billion. Volumes for the first three quarters of 2014 are down 5 per cent on the same period in 2013 – reaching a total of $85.2 billion.

Stuart Crow, head of Asia Pacific Capital Markets, JLL, said that a considerable number of private equity funds are approaching maturity across Asia Pacific. However, the volume of capital available in the market will easily absorb these disposals. Given the level of capital being allocated to real estate in Asia Pacific, demand continues to outpace the amount of assets available and the biggest challenge facing the market is a shortage of product supply for investment.

 Private equity groups alone have more than $30 billion in uncalled capital ready to be deployed across Asia Pacific so we expect these groups to be active as both buyers and sellers. Real estate investment trusts (REITs) also continue to sit below their target gearing levels, and teamed with fresh IPOs and POs these listed groups will also be actively seeking assets, he added.

 Megan Walters, head of research, Asia Pacific Capital Markets, JLL said that despite some investors moving up the risk curve, core assets will remain in favour amongst sovereign wealth and pension funds. We estimate that the potential level of capital coming from sources such as private equity funds, pension funds, REITs, insurers, HNWs and developers in 2015 accumulates to around $200 billion to $250 billion – that’s almost twice as much as the estimated $130 billion total transaction prediction for the year.