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Asia Pacific commercial real estate investment set to grow in 2015

  • The Jakarta Post

    The Jakarta Post

| Fri, October 24, 2014 | 09:43 am

JLL predicts 2015 transaction volumes will exceed 2014 levels as liquidity conditions improve with an estimated US$200 billion of capital available for investment

Direct commercial real-estate investment across Asia Pacific in 2015 is expected to exceed 2014 levels, a global real-estate services firm has reported.

Jones Lang LaSalle (JLL), which specializes in commercial property management, leasing and investment management, said that while transaction volumes in Q3 2014 were up just 1 percent on the same period last year, at $30.3 billion, JLL has identified over $200 billion worth of capital available for investment in the Asia Pacific real-estate market in 2015.

It said that activity was 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 percent on the same period in 2013 '€“ reaching a total of $85.2 billion.  

'€œThere are a considerable number of private equity funds approaching maturity across Asia Pacific, however, the volumes 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 supply of investable product,'€ said JLL head of Asia Pacific capital markets Stuart Crow.

He went on to say: '€œPrivate equity groups alone have over $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. 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.'€

 JLL head of Research, Asia Pacific capital markets Megan Walters, remarked:  '€œDespite some investors moving up the risk curve, core assets will remain in favor 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 $200-250 million '€“ that'€™s almost twice as much as the estimated $130 billion total transaction prediction for the year.

 She continued: '€œWith the Federal Reserve likely to end its quantitative easing (QE) program soon, investors will be more focused on their capital management and asset selection strategies. Investors are looking at ways to offset potential interest rate rise risk by actively managing their investments to improve operating income or boost disposal proceeds.'€

In Indonesia, investment activity remains quiet as investors show concern about the newly elected government'€™s ability to implement reforms, according to JLL.

Meanwhile, volumes have improved in Thailand following stabilization after a prolonged political crises and the military coup. In Malaysia, more large assets are coming into the market and investment activity is expected to increase in 2015.  

Investment activity in Singapore improved on last quarter to $3.3 billion but remains down 21 percent from the same time last year, supported by a SG$1.25 billion ($1 billion) transaction. Excluding this deal, the market remained quiet due to a lack of available product. Market activity is likely to improve in 2015 as investors look to crystallize profits following recent price growth.

It said that transaction volumes in Australia in Q3 2014 reached $6.9 billion, up 40 percent from the same time last year. Domestic groups, particularly REITs and wholesale funds have been very active.

Partnering remains a key trend and some foreign investors have deployed capital through joint ventures with a domestic manager. Core yields continue to tighten, with high-quality assets now trading at sub 6 percent, with secondary-grade markets also experiencing some compression., JLL said.

'€œInvestment activity in Japan remains strong, however volumes have eased slightly during the quarter, down 7 percent y-o-y to $8.1 billion,'€ it said.

According to JLL, investors continue to bid aggressively as a large number of assets come to the market. Corporate expansion continues to outpace supply and the rental growth outlook is easing concerns around entry pricing.

'€œInvestment activity will recover in the final quarter with a large pipeline of assets in the advanced stages of negotiation.'€

Meanwhile, it said that sentiment continues change in China with transaction volumes in the quarter down by 43 percent compared to 3Q 2013 to $ 4.0 billion.

'€œThe demand for commercial assets in China remains strong and once the wider economy stabilizes, investment activity will improve at a rapid pace,'€ it noted. (JP)