Asia Pacific Commercial Property Investment Stabilise in Q3, with Portfolio Deals Masking Slowdown On Pricing Stand-off


Asia Pacific Commercial Property Investment Stabilise in Q3, with Portfolio Deals Masking Slowdown On Pricing Stand-off

Singapore, November 7th, 2016 – Portfolio deals worth US$13.0 billion underpinned income-producing commercial real estate investment in Asia Pacific, where volumes were little changed in the third quarter of 2016 (Q3’16) compared to a year earllier. Analysis by Real Capital Analytics (RCA) revealed that these large transactions masked a generalised slowdown across the region caused by investors caution and a mismatch in pricing expectations between buyers and vendors. 

Completed sales of properties in the region, excluding development sites, totalled US$30.4 billion in Q3’16, 1.1% weaker than the same period a year earlier, according to RCA data. The region saw fewer active buyers and deals completed in July through September, with portfolio deals accounting for 43% of total investment volumes. For the first time nine months of the year, investment declined 18% year-on-year (YoY) to US$84.3 billion. 

Petra Blazkova, RCA’s Senior Director of Analytics for Asia Pacific, said: “High asset prices as well as economic, financial and political concerns, that caused a slowdown in activity in the first half of the year, continued to impact investment decisions in the Asia Pacific region. China, however, bucked the trend as it outperformed all other markets in the region during Q3’16, overtaking Australia as the second most active market by transaction volume.” 

Offices were the best performing section in Q3’16. It was the most active sector in eight of the region’s leading cities – Tokyo, Hong Kong, Singapore, Seoul, Sydney, Shanghai, Beijing and Melbourne. The average transaction size was US$80.0 million, or 2% more than in Q2’16, underscoring investors’ preference for core, secure income-producing assets. 

Prices, however, remained broadly unchanged at record highs, except in Australia, where yields continued to compress. 



In Mainland China, there were US$10.0 billion in direct real estate transactions recorded in Q3’16, representing 28% YoY growth. While this increase was in part due to the completion of a number of mega portfolio deals during the quarter, underlying appetite for Mainland China real estate remains robust. 

In Hong Kong, activity continued to be boosted by Mainland Chinese investors’ purchases, based on confidence fuelled by relatively limited new supply and low vacany rates. Total transaction volume in Hong Kong reachedd US$2.8 billion in Q3’16. Together with Mainland China, Hong Kong is the only other market in the region currently performing above their long-term volume averages. 

In Australia, market sentiment was positive, supported by relatively stable volumes of US$5.1 billion, which while down 13% YoY, is still around its long-term average. Prices continued to trend upwards, with yields compressing across all asset classes and geographies. Analysis by RCA revealed that the premium to Australian government bond yields remained wide in historical terms, indicating the asset prices could still rise further. 

In Singapore, overall volumes grew by 54% YoY on large but limited acquistions primarily within the office sector, notably the sale of a stake in Capital Square by Keppel Land to ARA Asset Management. 

In South Korea, where 90% of investors are domesitc, investment volumes reached US$2.8 billion in Q3’16, more than twice the level from a year ago. 

“South Korean investors have been very active both at home and internationally. Interestingly, South Korean institutions were Asia Pacific’s most prolific investors outside the region, making US$4.8 billion in purchases year-to-date. This pattern is likely to continue calculations,” Blazkova from RCA added. 

In Japan, volumes fell 27% YoY to US$6.8 billion on a lack of suitable stock and a reluctance by buyers to pay current prices. Its record high asset prices, a strong yen and competition from domestic real estate investment trust (J-REITs) are leading to what could be a structural shift, as international investors turned net sellers there for the first time in six years, RCA data showed. PAG, GE Capital and Fortress were among the notable international institutions to have disposed of assets in Japan during Q3’16.

In the region, cross-border transactions continued to increase in importance for the quarter, accounting for one-third or US$11.5 billion of the value of all transactions in the region in Q3’16. However, proportionally this was mainly due to domestic investors pulling back rather tahn a strong expansion of capital deployment across borders. 

For the third year in a row, investments by foreign investors into Asia Pacific declined, standing at less than US$10 billion currently compared to the peak of US $38 billion in 2007. Asian investors have been stepping in to fill the gap. 

Historically, Singapore capital has been the most nimble and aggressive in investing across the Asia Pacific region. It remains an important source of capital, but over the last nine months Chinese and Hong Kong investors have become the most dominant foregin source of capital within the region. So far this year, Chinese investors have purchased US$3.9 billion worth of assets in Hong Kong and made US$1.5 billion worth of investments in Australian property. 

RCA’s Blazkova concluded: “Uncertainty about economic growth, deflationary pressures and prospects for interest rates, combined with geopolitical risks, are weighing on investor sentiment. While the low interest rate environment militates for real estate investment, few investors are prepared to pay asking pricces for a dwindling number of assets available in the market as owners adopt a buy-and-hold strategy. Nonetheless, the region continues to present good opportunities and we can expect creative approaches especially from foreign investors that wish to invest in the Asia Pacific region.” 

The Asia Pacific Capital Trends report also revealed: 

  • The single largest property sale in Q3’16 was the US$658.7 million sale of a stake in Jinqiao Life Hub to Chongbang Development by Keppel Land. 
  • The largest portfolio transaction was CITIC’s US$4.7 billion (RMB 31.6 billion) residential assets sale to China Overseas L&I. 
  • Ten cities accounted for 65% of overall activity for the first nine months of 2016, as investors continued to focus on city or urban area performance rather than countries. 
  • New institutional capital is being led by Chinese insurance companies, particulary China Life, Anbang and Ping An, with cumulative domestic and international investments of more than US$10 billion each since early 2012. 
  • Chinese developers continued to increase their land bank, acquiring US$226.9 billion in development sites over the first nine months of the year. Average development site prices have increased by 54% YoY in Q3’16, RCA data shows. 




Real Capital Analytics (RCA) is the authority on the deals, the players and the trends that drive the commercial real estate investment markets. Covering all markets globally, RCA devliers timely and reliable data with unique insight into the market participants, pricing and capital flows. The most active investors, lenders and advisors depend on RCA’s market intelligence to formulate strategy and to source, underwrite and execute deals. An industry pioneer since 2000, RCA has offices in New York, San Jose, London and Singapore. For more information, visit 



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