Lack of sufficient investible stock across Asia-Pacific was the biggest obstacle to deploying capital in the region in 2016, said Ada Choi, senior director for CBRE Research.
The total number of commercial real estate transactions in Asia-Pacific dropped to 857 in 2016, a 46 percent decline from the 1,591 deals recorded the year before, global property consultancy CBRE has forecasted.
Australia and Japan have accounted for a quarter of the total decline this year to date, according to CBRE’s preliminary findings shared with PERE.
“From 2013 to 2015, many assets in the region changed hands to long-term money such as REITs and institutional investors [that] tend to have a long-term hold. It is difficult to recycle those assets in the sales market right now, and so we don’t have enough stock for investors to invest,” she explained.
The greatest intensity of decline has been seen in the mid-sized deals of around $100 million by real estate investment managers, Choi said.
“Mid-sized funds find it difficult to compete with institutional investors for some of the mega-deals. And if you look across the region, most funds are around $500 million in equity size; only a couple are larger funds of $1 billion or more.”
In another investing trend this year, many investors have become more active in the land market as opposed to acquiring completed assets. In Hong Kong, for instance, a mainland Chinese buyer is required to pay a 15 percent buyer stamp duty while purchasing an asset, but is not subject to any such tax for a land buy.
However, despite the subdued number of transactions, the overall volume of deals has remained on par with last year’s estimates. Around $100 billion in Asia-Pacific real estate investment activity has been recorded by CBRE so far this year, while in 2015 it was around $102 billion. This is largely due to the number of mega-transactions that have closed this year, including the sale of IFC in Seoul, Asia Square in Singapore, and Century Link in Shanghai, Choi said.