Japan tops Singapore in Asia Pac real estate transactions

Looks like recession isn't a big deal to some high profile Japanese.

Direct real estate investment markets in Asia Pacific witnessed a mixed performance in the first quarter of 2011 with Asia seeing a slight increase of 8 per cent in total sales turnover, while Pacific fell 69 per cent, quarter-on-quarter. Overall, transaction volume in Asia Pacific fell slightly by 2.4 per cent to US$14.4 billion, however it remains comfortably above the 6-year average. The property fundamentals in commercial real estate are generally in good shape and improving, despite efforts to ease economic growth and inflationary pressures in some Asian countries, according to CB Richard Ellis’ latest MarketView report – Asia Pacific Capital Markets for Q1 2011.

Japan was the most active market in terms of volume in Q1 2011, accounting for 37 per cent of total investment across Asia Pacific, with a number of high profile acquisitions. Singapore was the second most active market, accounting for 19 per cent of the total sales volume in Q1 2011. While the March 11 Great East Japan Earthquake is expected to slow investment activity in the short term, neither substantial change of investment policies nor serious cancellation of ongoing deals have so far been witnessed.

Asia Pacific-based REITs overtook institutional investors as the major purchaser group in Asia Pacific, accounting for 27 per cent of all acquisitions, by value. The success of the REIT category in this cycle to date is expected to lead to more stock exchange listings during 2011, particularly in Singapore.

Although cross-border acquisitions by REITs, especially those based in Asia, have been common in recent quarters, all REIT purchases in Q1 2011 were domestic. Reflective of the market overall, 75 per cent of all REIT activity was in Japan. This included a number of high profile properties, such as the headquarters building of Mitsubishi Heavy Industries, purchased by Nippon Building Fund REIT (and a domestic institutional investor) for US$728 million.

The office sector continues to attract the largest share of investment interest and activity across Asia Pacific. Almost 80 per cent of all transactions in Q1 were in the office sector. driving vacancy down and providing for rental and capital value growth either now or in the near future. This is a major motivation amongst investors presently considering commercial real estate. Investment in the office sector increased 20 per cent over Q4 2010 and is now 30 per cent above the quarterly average for the sector. The most traded markets in Q1 2011 were Tokyo (40 per cent of all office transactions by value), Singapore (14 per cent), Beijing (12 per cent) and Hong Kong (7 per cent). Three of the five largest office transactions in Q1 were in Tokyo. The ongoing strength of service sector employment is generally This is a major motivation amongst investors presently

Jeremy Lake, Executive Director, Investment Properties said “In Q1 2011, the largest transaction (S$899 million/ US$718 million) in Singapore was the sale of the grade A office building Capital Square, to a JV between Alpha Investment Partners and NTUC Income. There was strong competition for the property from local and foreign parties reconfirming the positive view that investors have on the office sector. We expect to see more office investment sales in 2011.”

“We’re seeing core real estate assets are still in strong demand across Asia Pacific. Global real estate investors including private equity, pension funds and REITs are taking advantage of the still low financing costs on prime assets and continue to tap into the growing pool of capital looking to secure or increase presence in the Asia Pacific region,” said Greg Penn, CB Richard Ellis’ Executive Director of Investment