Direct investments in Asia’s commercial real estate for the first three quarters of 2013 already have grown 25 percent from the first three quarters of 2012, growth that is positioning this year to be the region’s strongest on record, according to a recent report by property services firm Jones Lang LaSalle (JLL).
Transaction volumes have grown every quarter this year on a year-on-year basis. For example, in the third quarter, investment in commercial real estate surged 33 percent year-on year to $30 billion. To date, investment activity for 2013 has reached $89.6 billion, prompting JLL to revise its year-end forecast from $110 billion to $120 billion.
“If this figure is reached, it will put 2013 on a par with 2007 as the strongest year ever by transaction volumes,” said Stuart Crow, head of Asia-Pacific capital markets, in a statement.
Strong growth has been led primarily by the three large markets of Japan, China and Australia, which combined make up 69 percent of the year’s completed transactions. Growth in Japan and China has been particularly striking, as third quarter volumes shot up 139 percent and 167 percent year-on-year, respectively.
Growth in other markets, including the US and Europe, also has been positive but not as strong. Year-on-year, the US and Europe are averaging just 18 percent growth, according to Megan Walters, head of research for Asia-Pacific capital markets. However, quarter-by-quarter figures in Asia tend to be more “lumpy,” she admitted.
Surprisingly, little of this year’s growth actually came from non-Asian investors. In total, approximately $71.5 billion of transactions originated from domestic or regional investors, as compared to just $8.4 billion coming from overseas investors (see the infographic above).
“The Asia-Pacific commercial property markets continue to outperform on the back of unrelenting demand for exposure to direct real estate returns in the region,” Crow added in the statement. “We are seeing increased activity from Asian pension and sovereign funds, together with new sources of global capital that are allocating to Asian real estate for the first time.”
Walters also pointed out that Asian investors are getting more active in overseas markets, with investment in Europe and the US growing substantially. In total, Asian investors have committed $8 billion to European real estate and $4.8 billion to the US so far this year, notable increases from the $7.8 billion and $2 billion they committed during all of 2012.
“In direct real estate investment, Asia exports more capital than it gets back, and it will probably continue to do so,” Walters told PERE.