Asia-Pacific commercial real estate investment volumes reached US $ 83.5 billion in the first half of 2021, an increase of 39% year-on-year. Increased investment in logistics and industry, office and retail sectors indicates a continued recovery in the region’s capital markets. Volumes from January to June 2021 were down 6% from pre-Covid-19 levels for the same period of 2019, according to JLL (NYSE: JLL) Asia Pacific Capital Tracker.
China, Australia and South Korea accounted for 69% of the total investment volume, while activity in Japan was lower due to the Covid-19 disruptions. JLL’s analysis of capital flows in the second quarter of 2021 reveals that investment in office, logistics and industry, and retail accounted for 31%, 30% and 30% respectively.
“Real estate investing in Asia-Pacific is clearly back as investors reaffirmed their positive outlook, ensuring significant year-on-year volume growth in the first half of the year. We expect activity to continue in the second half of 2021 as investors turn to portfolio transactions, corporate sales and leasebacks, and seeking greater diversification in sectors such as logistics and retail. ‘industry, life sciences and the multi-family,’ said Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL.
Logistics and industrial investments jumped 215% year-on-year in the second quarter to reach US $ 15 billion, supported by favorable demand dynamics driven by regional e-commerce expansion, relative yield spreads and the desire of investors to diversify into more resilient asset classes. Major transactions, including the acquisition of the Milestone portfolio by ESR from Blackstone in Australia, were indicative of the demand for high quality logistics and industrial assets in the region.
Throughout the second quarter, office demand improved in most cities, reaching $ 15.5 billion in investment. Investors were supported by the Australian CBD office markets, which recorded positive net absorption for the first time since the fourth quarter of 2019, while office rents turned in Singapore and Shanghai.
Sale-leaseback transactions to businesses exceeded 10% of volumes in the first half of 2021, compared to an average of 7% in 2015 to 2020. According to JLL, this trend has accelerated in Japan where, since the start of the pandemic, more companies are moving towards a strategy of thin assets to strengthen their balance sheets. Similarly, in Australia, companies have turned to sale and leaseback transactions to unlock value and focus on their core business.
Sale-leaseback transactions included Dentsu’s head office in Tokyo, on the verge of being acquired by Hulic for up to US $ 3 billion; and the David Jones flagship store in Sydney, which sold to Charter Hall for US $ 374 million (AU $ 510 million) with a 20-year leaseback.
“We expect logistics and industrial investments to double to $ 50 billion to $ 60 billion by 2025, while at the same time investors see signs of stabilization in office markets. With a continued appetite for defensive assets and expected growth avenues like sale and leaseback, we maintain our expectations that investment volumes will increase by 15-20% in 2021, ”said Regina Lim, Manager of Capital Markets Research, Asia-Pacific, JLL.
Similar to this:
JLL Hotels & Hospitality Group appoints Tao Zhou Greater China Managing Director
Logistics and industrial investments in Asia-Pacific to double within five years – JLL
Seven in 10 companies in Asia-Pacific are willing to pay higher rent for green buildings: JLL