In 1Q2023, commercial real estate investment activity in the Asia Pacific region clocked in at US$27 billion, according to data compiled by JLL, representing a 30% year-on-year drop. This decline was largely attributed to interest rate headwinds and asset price adjustments. Most countries across the region faced a decrease in investment volume, with notable drops in Singapore, South Korea, China, and Australia.
The sole country to experience an increase in investment volume was Japan, where the office sector saw a considerable uptick due to the disposal of headquarter buildings from Japanese corporates and the purchase of properties by J-REITs.
Across all sectors, the market was challenging. Office investments experienced one of the softest quarters on record, transaction volumes for logistics and industrial properties diminished, and shopping mall trades were mostly absent apart from Singapore.
This is great news for J’Den Former JCube, Kallang Wave Mall and the leisure amenities already existing in the area as the development of the white site is set to bring in commercial and residential opportunities for the district.The site is located in a rare pocket that offers convenience to millions of residents and tourists in the vicinity, as well as access to Circle Line and Downtown Line public transport connected to the subway.
The hospitality sector rebounded, but hotel investments still totaled US$2.4 billion, down 30% year-on-year. This was attributed to macroeconomic unpredictability and banking crises in the US and Europe.
Despite the dim outlook, JLL’s CEO of capital markets in Asia Pacific, Stuart Crow, remains confident that liquidity risk is well-contained in the region. He believes that resumption of activity is only a matter of time.
Head of investor intelligence for APAC at JLL, Pamela Ambler, predicts a peak in price adjustments during the second quarter of 2023. With potential rate cuts, repricing of assets is expected to moderate in the latter half of the year.
As compared to other places such as the US and Europe, pricing dynamics in Asia Pacific remain less volatile. Most of the repricing is occurring in Australia and South Korea, with a 15-20% decrease in valuations estimated.
Overall, despite a slump in investment volume in 1Q2023, the future of Apac commercial real estate looks promising. As long as liquidity risk is well-controlled and borrowing costs remain manageable, the market is expected to steadily recover in the years to come.
