Significant rise in Asian real estate investment

Real estate investment in Asia picked up significantly in the second half of 2010 with Japan, Hong Kong, Singapore and China the most active markets.

These four markets alone accounted for more than US$29 billion of transactions in the period between July and December 2010, a massive 83 per cent of the total regional volume.

The fourth quarter saw a slight slowdown in investment activity, with total transaction volume falling slightly to US$16.5 billion – compared to the US$18.5 billion recorded in the third quarter.

The Asian real estate investment market nevertheless ended 2010 on a strong note, with total transaction volume reaching US$62 billion, a surge of 59 per cent year-on-year, according to CB Richard Ellis’ Asia Investment MarketView report for the second half of 2010.

Real estate investment activity declined in most locations in the fourth quarter with the exception of China, Malaysia and Singapore, all of which posted positive quarter-on-quarter increases in transaction volume by increments of 60 per cent, 53 per cent and 31 per cent respectively.

China was one of the first markets to recover in the present cycle and continues to be dominated by domestic corporations, while foreign institutional investors mostly disposed of investment properties in the country at a gain. Institutional investors have been shifting to other investment markets, with Singapore witnessing a record quarterly investment volume of more than US$5 billion in the fourth quarter of 2010, a total of 31 per cent of the total regional volume for the period.

Elsewhere in South East Asia, the Malaysian investment market received a boost from Starhill REIT’s acquisition of eight hospitality properties for a total of US$330 million.

Cross border real estate investment activity continued to pick up in 2010, accounting for US$11 billion of total transaction volume, a huge increase of 96 per cent year-on-year but still well down on the 2007 peak of US$27 billion. Investment by non-Asian international investors also picked up markedly during the year, reaching an estimated US$4 billion, while investment activity by institutional investors and REOCs (Real Estate Operating Companies) also took off with total investment volume collectively reaching US$13 billion, a 74 per cent increase on the previous year. Investment activity by Asian REITs rose significantly in 2010 by 195 per cent to US$10.5 billion.

Investor interest in the second half of 2010 remained focused on prime assets offering stable income streams generated from existing anchor tenants and providing growth over the longer term. The office sector attracted US$26 billion worth of transactions in the second half, 43 per cent of total investment volume, while investment in retail assets also picked up during the July – December period, accounting for US$7 billion or 21 per cent of total investment turnover.

“Both foreign and domestic investors continued to be active in 2010. We expect that levels of activity will increase in 2011 as both foreign and domestic investors tap into the growing pool of capital looking to secure or increase its presence in Asia,” said Greg Penn, CB Richard Ellis’ Executive Director of Investment Properties for Asia.

“The Asian real estate investment market enjoyed an encouraging end to the year and prices for prime investment property have now recovered substantially,” added Nick Axford, CB Richard Ellis’ Head of Research for Asia Pacific. “The market outlook remains generally optimistic and we expect further real estate investment and portfolio expansion from Asian pension funds, sovereign wealth funds and REITs across Asia’s mature and emerging markets in 2011.”