Investment values in Asia Pacific point to resilience

Despite global headwinds and a challenging global economic environment, strong investment volumes in the Asia Pacific property market point to signs of resilience, according to the latest analysis of the market by Jones Lang LaSalle in their Q2 Asia Pacific Property Digest (APPD). However, a slowdown in leasing activity points suggests that the region is not completely immune.

Direct commercial real estate investment activity rebounded in Q2 with volumes increasing 26 percent y-o-y to US$26 billion. Japan saw the biggest y-o-y growth (290 percent) as it recovered from the Tohoku earthquake last March, while Hong Kong, Singapore and China also registered strong double-digit growth.

With stronger investment volumes, capital values also grew in most major markets. Jakarta and Beijing CBDs saw the largest q-o-q increases (9 percent and 11 percent respectively) while capital values in Shanghai, Tokyo and Sydney exhibited small gains of up to 1.5 percent.

However, office leasing activity was down about 10 percent in Q2 compared  to the same period of the last year, attributable to corporate caution and the flow-on effects of ongoing economic uncertainty.

“The Asia Pacific property markets are holding up relatively well given the global economic backdrop. Leasing activity levels should continue to trend moderately lower than last year’s record levels, while we expect investors will continue to search out opportunities, particularly in prime locations. In turn, we anticipate rents and capital values will continue to grow in most markets, albeit at a slower rate than last year,” said Dr Jane Murray, head of Research Asia Pacific at Jones Lang LaSalle.

“While we are seeing some healthy growth forecasts for the Asia Pacific economy, leasing activity has steadied during the course of the year. There has been a decline in the established financial markets, however we are seeing strong demand in key South East Asian markets, and certain cities in China. While this pattern is likely to continue through to the remainder of the year, we are optimistic that leasing will remain largely stable,” said Jeremy Sheldon, managing director, Markets Asia Pacific Jones Lang LaSalle.

While residential leasing demand remained generally healthy in China, Jakarta and Manila, high-end leasing demand was subdued in Hong Kong and Singapore. Rentals climbed in most markets outside of Hong Kong, Singapore and Bangkok.