Real estate transaction volumes in Asia Pacific increase by 8%

Investment volumes for Asia Pacific commercial real estate markets increased by 8% in the third quarter of 2010 to $29.6 billion, according to the DTZ Research’s Investment Market Update.

In a statement, the research company said investment volumes in Singapore had surpassed the $3 billion market last seen in 2008, while investment volumes in Malaysia reached a record high of $1.9 billion in Q3 representing a 233% improvement on the second quarter, assisted by large property acquisitions of retail assets by domestic REITS.

Tony McGough, Global Head of DTZ Forecasting & Strategy Research, said, “Our report shows that improving confidence in the regional economy has boosted investment activity across the majority of Asia Pacific markets resulting in record increases in Malaysia and Singapore. Our recent report, ‘The Great Wall of Money’, estimates that $71 billion of new capital will target the region in 2011. Combined with the positive economic outlook, we expect investment volumes to reach $145 billion in 2011.”

DTZ said the uptrend is set to continue for the rest of 2010 and into next year with investment volumes predicted to reach $145 billion in 2011, a 12% increase on the forecast of $129 billion for 2010.

The report reveals that the established markets of Australia and Hong Kong both recorded third quarter investment increases of over 40% to $4.3 billion and $1.7 billion respectively. Volumes in Japan also increased 25% quarter-on-quarter to $4.7 billion.

The Investment Market Update highlights that the additional restrictions imposed by the Chinese Government in the residential sector have continued to impact on commercial real estate investment with volumes in China continuing to fall, decreasing 21% to US$11.9 billion in the third quarter. However, the decline has slowed since the last quarter and China still remains the most liquid market in Asia Pacific, accounting for 40% of overall activity in the third quarter.

David Green-Morgan, DTZ Asia Pacific Research head, said: “Despite the continuing slow down in bank lending in China, transactional activity around the region continues to improve with investors now starting to look outside their own domestic markets for opportunities.”

The DTZ report shows that the value of retail transactions reached a record $9.9 billion, an increase of 56% on quarter two volumes, surpassing office transactions for the first time. Significant activity included the sale of the Seibu Ikebukuro department store in Japan ($1.4 billion) and the Sunway Pyramid Shopping Mall in Malaysia ($729 million).

Despite trailing the retail sector, office transactions increased by 20% to $8.2 billion whilst transactions of industrial assets increased by 8% to $2.3 billion. Mixed use property schemes registered a 30% decline on the $11.5 billion recorded in Q2 2010, mainly in China.

Domestic investors continued to dominant purchasing activity in the third quarter of 2010 accounting for 89% of overall investments, although this was down from 91% in Q2. Intra-regional investors showed a preference for domestic assets, reducing activity to $1.4bn, nearly a third less than the second quarter of 2010.

Green-Morgan said, “The economic outlook for Asia Pacific remains optimistic with capital and rental values predicted to increase across nearly all markets during 2011. We expect institutions to become increasingly significant in the region particularly sovereign wealth and pension funds.”