Asia Pacific commercial property deals slide 8% in 2019

Asia-Pacific commercial real estate investment dipped 8% to US$158.5bn in 2019, driven by a lack of entity-scale deals and the slump in Hong Kong.

According to Real Capital Analytics (RCA), commercial real estate investment volumes slid in the fourth quarter of 2019 in one of the largest year-on-year declines in more than three years.

“The growing attractiveness of Asia Pacific real estate as an investment asset class and the depth of liquidity now available in the large city markets as safe havens for capital, meant transaction volumes in the region displayed incredible resilience last year,” said David Green-Morgan, managing director for Asia Pacific at RCA.

“They mostly held-up in the face of the US-China trade war, the Japan-South Korea trade dispute and the battering Hong Kong investments received from the political unrest.”

RCA noted that the investor pullback was limited to specific areas of weakness like Hong Kong, with the largest country markets remaining relatively unscathed by the economic headwinds.

Total cross-border investments in Asia Pacific reached US$57bn in 2019 for a second consecutive record year.

Over the past decade, North American and regional super investors such as Blackstone and GIC have played an important role in the increased regional cross-border capital flows in Asia Pacific.

In the past two years, European players have made a big showing in the region, with Germany’s Allianz Real Estate becoming the second largest cross-border investor in APAC last year.

At an asset level, traditional categories like the office, retail and industrial sectors posted YOY investment volume declines last year, while investment volumes in alternatives like hotels, apartments and senior housing surged.

The hotel sector marked its second record-breaking year in a row, as sales of individual hotels soared by 50%. Total hotel investments reached US$15.8bn in 2019.

“Hotel investment volumes were well above the long-term average in 2019, with investors starting to venture further afield into Southeast Asian markets such as Vietnam and Myanmar,” said Green-Morgan.

“Tourism is growing everywhere across the region, not just in new locations but also more established markets. Japan benefitted last year from the Rugby World Cup in Tokyo and in 2020 it is hosting the Summer Olympics so that, combined with very high room rates, makes it attractive from an investment perspective.

“The hotel sector used to be quite small in APAC, but it has now raced ahead of the other alternative real estate asset classes and is almost on a par with the industrial sector in terms of market size.”

This analysis comes from RCA’s latest quarterly Asia Pacific Capital Trends report. Continue reading to see previous quarterly updates.