Asia Pacific 1H 2022 commercial real estate investment totaled US$70.9 billion

Shanghai, August 29, 2022 – According to data and analysis published in the JLL (NYSE: JLL) Q2 2022 Capital Tracker, direct real estate investments in Asia Pacific totaled US$70.9 billion in the first half as rate cycle tightened and inflationary concerns began to affect transaction activity. Investment in Asia Pacific commercial real estate decreased by 17% year-on-year in the first half of 2022, due to a moderation of deal activity in several of the region’s major economies including China, Japan and Australia. Investment in China decreased by 39% to US$14.1 billion due to Covid disruptions.

“Investment volumes in the first half declined moderately from the high base set in 2021 as external factors emerged and investors adjusted capital deployment strategies to align with a more aggressive rate tightening cycle. Encouragingly, dry powder levels remain high and we are seeing that the appetite for real assets remains strong. Clear opportunities exist and we’re advising clients to expect a new price discovery phase to remain a dominant theme for the remainder of 2022, as macroeconomic headwinds and ongoing inflationary pressures influence decisions,” says Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL.

The Asia Pacific office sector remained the region’s most liquid asset class, drawing US$30.6 billion in investments in the first half, declining a modest 8% year-on-year from last year’s high base. Industrial and logistics investments (US$14.6 billion) tapered off by 37% from record volumes in 2021, while deployments into retail assets (US$14.0 billion) declined by 31% year-on-year. Investments into alternative assets (US$1.4 billion), such as data centers and living declined modestly, dropping by 12% year-on-year.

Asia Pacific-dedicated fundraising continued its momentum despite falls in global activity. In a sign of the longer-term positivity in the Asia Pacific real estate sector, development focused funds in logistics, living, data centers, India, and Southeast Asia continue to secure financial commitments from global and regional institutional investors.

Additionally, sustainability frameworks emerged as high on the agenda for investment committees, influencing acquisition decisions. JLL expects investors to deploy more capital into value-add strategies by refurbishing old offices into green buildings as occupiers increasingly choose higher quality space post-pandemic.

In China, due to Covid resurgence, the H1 GDP grew at a low rate of 2.5% and real estate sector was facing challenges. China commercial real estate investment market experienced a contraction of 39% YoY to US$14.1 billion in 2022 H1 as global institutional investors became cautious. Though at the same time, domestic buyers remain active in acquiring core office assets. Notable transactions include the sale of Sino-Ocean’s Beijing Rayzone to Ping An as well as China Resources selling Shanghai Suhewan Center to Erdos.

Alternatives will become increasingly significant towards the second half of 2022 as momentum continues in New Economy investment. Logistics asset performance has stabilized amidst renewed leasing demand and will continue to be sought after by investors. Multi-Family assets demonstrated the resilience on rent generation so investors actively pursuing opportunities in this asset class.

“Despite the macroeconomic pressure, buyers going against market tendency will be able to capitalize on lowered asset price expectations. Investors with strong asset management capabilities in Alternatives will be able to drive income streams as they push through current headwinds.” says Eric Pang, Head of Capital Markets, JLL China. “In addition, as China’s Life Science sector continues to be a strategic focus and as the industry matures, there will be renewed demand for Life Science specific real estate. Scarcity of available assets will attract institutional investors’ interest as they expand into this asset type.”