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News Release

Macau

Investment into retail real estate in Asia Pacific to remain strong in 2014 as demand outweighs supply

Latest report from JLL predicts high transaction volumes in 2014, driven by Japan and China


  • ​Incre​asing weight of capital targeting region’s retail real estate markets in 2014
  • Limited availability of investible stock forcing investors up the risk curve into emerging markets
  • Japan and China continue to drive transaction volumes
  • Expected further increase in number of strategic partnerships

MACAU, 2 April 2014 – Retail real estate investment markets in Asia Pacific are set to remain strong in 2014, exceeding the already ‘prolific activity’ witnessed in 2013, according to the latest data from JLL. The Asia Pacific Retail Investment Outlook and Review highlights the likely imbalance of demand and supply for the rest of the year as the increasing the weight of capital targeting the region, driven by new capital raises and changing regulations, is met with a limited availability of investible stock.

The outlook comes as retail investment markets in Asia Pacific witnessed another strong year of activity in 2013 with total turnover increasing by USD 6.16 billion year-on-year to total USD 21.17 billion at year-end. While the amount of domestic and international capital targeting investment in retail real estate in the region is expected to grow during 2014, the shortage of stock will keep prices high and force investors up the risk curve and into emerging economies.

David Raven, Lead Director, Retail Investment, Asia Pacific Capital Markets at JLL commented, “We’re seeing global markets start to recover from the Global Financial Crisis (GFC) and show more stabilised growth. This, in turn, will improve the ‘investibility’ of emerging markets from a retail real estate perspective, rewarding pioneering investors with first mover advantage in terms of asset quality and levels of return. We anticipate the depth and variety of investor interest in these markets to grow throughout the rest of the year, but the real key to success will depend on their ability to understand the dynamics of local markets and to effectively manage their assets.”

One way in which investors are likely to navigate local market nuances is through strategic partnerships, the popularity of which is likely to increase throughout 2014 as capital looks for operational expertise and local operators, in turn, pitch for financial backing.

David expands; “We anticipate seeing two types of strategic partnerships as we make our way through 2014. The first sees savvy owners partnering with operational expertise such as retail asset managers, in order to maximise the performance of their assets. The second will occur in larger, more mature markets where existing owners can entice a relatively passive capital partner with the promise of access to core stock.”

While interest in emerging markets will play a role in Asia Pacific’s retail landscape this year, transaction volumes are set to remain driven by Japan and China where investor interest remains strong from both domestic and international players. Despite continued demand for Chinese retail real estate, however, investors are likely to become more ‘considered’ when entering the market as a strong development pipeline, and an ever maturing market will require a more measured approach to individual assets in order to maintain a competitive position.

David concludes, “As the global economy finally appears to be gaining momentum and shaking off the effects of the GFC, there will be both challenges and opportunities for investors looking at retail real estate in Asia Pacific. However, as we look forward to the rest of the year with a positive forecast, the sector continues to offer a strong opportunity for strategic sellers.”​