Asia-Pacific commercial investment at lowest level since 2010

Commercial investments between July and September 2023 totalled just US$21.3 billion, making this the lowest quarterly figure recorded in over 13 years.

The last time rates this low were recorded was in Q2 2010, when the world was still grappling with the aftershocks of the global financial crisis.

The sectors that were hit the hardest were office and retail, a trend which Stuart Crow, JLL’s CEO of Asia Pacific Capital Markets, put down to wariness about the future of work in the post-pandemic world.

“Despite a strengthening return to office narrative and low vacancy rates in many markets, investors remain generally more cautious on the office sector,” said Mr Crow.

High debt levels and repricing pressures have also put investors off, according to the CEO.

“We maintain our confidence in the longer-term attractiveness and resilience of Asia Pacific’s commercial real estate but remain realistic that investors are seeking more clarity on pricing and the macroeconomy,” he stated.

China was the most active market in the region, and one of the only Asia-Pacific markets to buck the downward trend. A total of US$4.7 billion was invested in China throughout Q3, up 43 per cent year-on-year, despite limited participation from overseas investors.

In Japan, tourism recovery and some high-profile hotel acquisitions led to a 3 per cent growth in commercial investment year-on-year.

Over in South Korea, however, transactions dropped a substantial 35 per cent since Q3 2022, and Singapore investments dropped by 11 per cent to just US$2 billion.

Australian commercial investment rates fared the worst by far. Only US$3.8 billion worth of transactions took place in Q3 2023, with investors largely put off by price discovery and funding cost changes.

Many stakeholders reallocated their Australian investments into industrial and logistics, and into student housing, with JLL reporting an increase in conviction in these areas.

Looking forward, JLL’s head of investor intelligence for the Asia Pacific, Pamela Ambler, forecast that “as we approach the end of 2023, investors will weight the elevated cost of capital against an uncertain macroeconomic environment”.

“In the region, interest rate hike cycles are nearing their end – the Reserve Bank of New Zealand and Bank of Korea are likely to conclude their monetary tightening whilst the Reserve Bank of Australia may have more work to do,” Ms Ambler stated.

“With the Fed’s upcoming decision on adjusting interest rates, we can also expect investment activity to pick up as the cost of debt eases,” she predicted.