Property transactions in Asia Pacific declined by 36 percent in Q1 2016 in comparison to Q4 last year, according to data released by the property consultancy CBRE.
The sizeable drop in investment volumes is indicative of how stock market volatility and weaker economic environment has made global investors more risk-averse of deploying capital in the region.
CBRE has estimated that real estate investment volumes fell to $18.6 billion in the first three months of the year from $29.4 billion in the last quarter of 2015. These include all transactions valued $10 million and above in office, industrial, retail and mixed-use sectors. Residential and development deals are excluded from the tabulation.
Much of this decline has been attributed to tepid commercial transaction volumes in Australia and Japan, along with falling retail investment in Hong Kong. The biggest percentage drop was in Japan with investment volumes falling by 31 percent on a year-on-year basis. In the first quarter of 2016 Japan recorded $5.9 billion worth of transactions while the first quarter of 2015 recorded $8.6 billion. In Australia transaction volumes fell by 17 percent to $3.1 billion, according to preliminary data published by the real estate consultancy.
“In Australia and Japan even though international investors remain active with strong demand for core assets, transaction volume in both markets declined,” said Dr Henry Chin, head of research, CBRE Asia Pacific. “High prices in Australia discouraged domestic fund managers from purchasing, with some opting to sell non-core assets to recycle capital for future investments. In Japan, despite strong demand from investors, the lack of stock was a limitation as there were fewer institutional quality properties being offered for sale, especially in core markets such as Tokyo.”
Weaker business sentiment has also translated into softening occupier markets in many regions. Particularly in Hong Kong and Tokyo, landlords have started to become more cautious and focus on tenant retention, Chin said.
China however has emerged as a key outlier. According to CBRE the country registered a 9 percent uptick in real estate investment activity. Domestic investors increased their investments by 36 percent in the previous quarter to take advantage of cheap funding amid a low interest rate environment.