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MACAU, 21 January, 2015 – Transaction volumes across Asia Pacific commercial real estate markets are expected to set a new record in 2015, with a full year estimate of US$140 billion, according to new figures from JLL.
Commercial real estate transaction volumes in Q4 2014 came in ahead of expectations at US$43 billion, up 17 percent on the same quarter last year. As a result, full year transaction volumes finished in line with 2013, up two percent to US$131 billion, following a slow first half of 2014.
The active end to 2014 will support strong volumes in the first half of this year and JLL predicts that 2015 volumes overall could reach a record USD$140 billion.
Dr Megan Walters, Head of Research, Asia Pacific Capital Markets, JLL, said: "The end of QE in the US and the expectation that interest rates will rise could see some cyclical investors divesting assets and income based investors, such as Sovereign Wealth Funds (SWFs), making acquisitions. Private equity (PE) funds will almost certainly be active buyers and sellers in the region in 2015. Many of the 2006-2007 PE funds are reaching maturity and there are a number of funds actively in the market after raising in excess of USD$10 billion last year."
The final quarter of 2014 was buoyed by strong results in Asia Pacific's largest markets of Australia, Japan and China as well as record performances from Korea and New Zealand.
Walters continued: "Investors are becoming more flexible in their chosen destinations across Asia Pacific and we are seeing new players move into markets such as Korea, India, Thailand and some of the emerging markets. Singapore and Hong Kong continue to lag behind the regional average; however, both markets look set for a recovery in transaction volumes in 2015. Cross-border investors were very active in the final quarter as both buyers and vendors, playing a role in 36 percent of transactions."
Transaction volumes in Australia reached US$7.5 billion in the final quarter, up 18 percent on the same time last year. Full volumes came in at US$26.9 billion, a growth rate of 21 percent (higher in local currency terms). Cross-border buyers were active through Q4, accounting for 32 percent of deal volumes. The investment market should remain active but volumes are expected to reduce slightly in 2015, as many of the large existing assets have traded over the past few years. Fund through acquisitions of development product have also boosted volumes in recent years, however, many of these major projects have now traded and the development pipeline has thinned out.
Japan finished the year in a strong position, recording US$14.8 billion worth of transactions, up 21 percent on the same time last year. This has pushed the 2014 full year result 4 percent ahead of 2013 levels to US$43.4 billion (higher in local currency terms). A number of very large deals were traded during the final quarter, supporting the overall growth rate. The snap election called in November did little to dampen investor confidence and JLL expects market sentiment to remain strong as we enter 2015.
Transaction volumes in China finished 2014 strongly, recording US$7 billion, albeit still down 17 percent on the same time in 2013. Liquidity throughout the year has fallen short of expectation, down 23 percent to US$19.2 billion. Macro concerns around developers and residential prices continue to weigh on the commercial markets, with price declines accelerating further in December off the back of concerns about oversupply. The removal of purchaser restrictions and the recent interest rate reduction could support sales rates in the residential market and stabilise prices, which would lead to a strong improvement in overall sentiment in 2015.
Singapore finished the year quietly, recording US$1.2 billion in transactions, down 64 percent on Q4 2013. A lack of available product on the market was a key theme throughout the year, with full year volumes down 30 percent to US$ 8.1 billion. However, a number of deals are already at advanced stages of negotiations and a there is a strong deal pipeline in 2015.
Investment activity in Hong Kong improved in the final quarter of 2014, delivering US$2.2 billion, up 24 percent on the same time last year. Over the year, volumes were down 1 percent to US$ 7.2 billion. Occupier market fundamentals remain positive and rental growth prospects could further tempt corporate and end user activity in the investment markets.
South Korea finished the year on a strong note, recording USD$4.8billion in transactions, up 113 percent on the final quarter of 2013. Over the year, volumes in South Korea grew by 27 percent to US$10.6 billion. The market continues to attract foreign investor interest with a number of notable cross border buyers taking assets throughout the final quarter. The outlook for 2015 is relatively positive, with a number of landlords expected to realize profits off the back of strong capital value growth over the past few years.
Transaction volumes in India improved by 74 percent in 2014 to a full year figure of US$2.3 billion. The outlook for 2015 is positive and volumes are expected to grow significantly with a number of new investors positioning themselves for acquisitions this year. This momentum is expected to continue throughout 2015 with the additional capital from private equity funds. The macro picture looks healthy and this is being supported by lower energy costs, which could present an opportunity for fiscal reform.
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Notes to Editors:
Find the release online here.
JLL's Asia Pacific capital markets team comprises 300 people working in 80 offices across the region. In 2013 JLL Asia Pacific Capital Markets was ranked top real estate investment advisor in Asia Pacific by Real Capital Analytics (RCA), advising on over US$21.5 billion of commercial real estate investment transactions across the region, equating to 36 percent market share.
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