Bids data: behind the headlines on APAC investment activity

Commercial real estate activity has remained sluggish for a while now, with headline investment volumes in APAC seeing a 24% reduction y-o-y in 1H 2023. Behind the aggregated deal volume, JLL’s proprietary deal management platform tracks market opportunities and competing bids. As transactional evidence remains low, these bids offer insights into market liquidity, investor sentiment and potentially new pricing benchmarks.

The key theme for 1H 2023 was the pricing reset, as investors were testing the waters after the pandemic. On average, bids across potential opportunities were 5.3% lower than the asking price compared to 0.7% in 2022. In the office sector, investors were seen favouring certain assets in their bids, prioritising quality and stabilised core assets.

Across APAC, deals closed faster in 1H2023 than in 2022. The deal lifespan was 13 months for office, 7 for retail and 19 for industrial in 1H2023. In comparison, deal length was 18 months for office, 16 for retail and 9 for industrial in 2022. Deal lifespan refers to deal opportunity length – from engagement to settlement. 

Figure 1: 1H2023 unique bidders per opportunity and deal length

Source: JLL Research

Office deals were in decline — and when they did occur, price declines were recorded. In 1Q 2023, deals closed at a price 12.7% lower than asking. Key deals that drove this price discount were Concordian Building in Seoul, Osaka Bay Tower and 260 Queen Street in Sydney.

In 2Q 2023, deals closed 5.7% lower than the asking price. In Australia, 44 Market Street in Sydney traded at ~17% discount to book value. Meanwhile, in South Korea, office saw the least repricing relative to retail and logistics, owing to strengthening investor demand and increasing opportunities on the market.

Figure 2: Office Bid-Ask-Close Spread

Source: JLL Research

The retail investment market is still recovering from the pandemic-induced downturn. In 1Q 2023, the average bid price was 31% lower than the asking, deals closed 20% lower than the asking price, and investment volumes declined 35% y-o-y. This is despite the average unique bidders per opportunity rising to 6.6 in 1Q 2023, up from 2.9 in 4Q 2022. That implies investors threw in low bids just to try their luck, but not many stuck.

Figure 3: Retail Bid-Ask-Close Spread

Source: JLL Research

Over the past three years, there was a flurry of industrial deal activity, riding the e-commerce wave. Bids poured into industrial assets, with the average bid price 8.1% above asking, and deals closed at an average of 9.9% above the asking price in 2022. However, due to rising financing rates, large wave of new supply and slowing rental growth in certain countries, 2023 deal activity will likely diverge among APAC countries. Among the key sectors tracked, industrial price adjustment remained relatively resilient in 1H 2023, with bids closing 2.5% lower than the asking price (office 7.6% lower and retail 10.2% lower than asking).

Figure 4: 2022 Bid-Ask-Close Spread by Sector

Source: JLL Research

Investors continue to look for signs of a bottoming out. Dry powder sits around, awaiting deployment.