Domestic investment strengthened in Asia Pacific last year with core regional markets, especially China and South Korea, seeing strong activity at home due to greater global economic and political uncertainty.
The latest JLL research on real estate investment flows shows Chinese domestic investment increased by 50 percent year-on-year, with acquisitions mainly in Shanghai and Beijing as well as select Tier 1.5 cities like
Chengdu and Chongqing. South Korea’s investment market registered record transactions volumes in 2016 as domestic investment increases by 75 percent to reach US$12.4 billion.
The Chinese Government’s increased monitoring on capital outflow has led domestic investors to turn their attention to home, outbidding foreign investors for local projects. In South Korea, office assets are proving to be most attractive for corporate and institutional investors.
“In China, South Korea and Japan, we saw an increase in the volume of domestic deals in 2016, spurred by strong in-country opportunities as well as many institutional investors allocating more money to the real estate asset class in general,” says Myles Huang, from JLL’s Asia Pacific Capital Markets Research team.
Foreign investment still significant
Foreign players remain a key driver for inbound investments in Asia Pacific. Singapore’s inbound investment quadrupled for 2016 as foreign buyers flocked to office sectors. In Japan, foreign investors targeted secondary cities such as Osaka, Yokohama, Chiba and Saitama while South Korea saw strong activity from investors such as Brookfield, Blackstone, CIC and M&G, and it is likely there are more opportunities in the pipeline as Korean conglomerates continue to offload non-core assets with leasebacks to improve their financial position.
Australia also experience strong offshore investment, which accounted for 42 percent of total transactions in 2016. Prime assets in Sydney and Melbourne are most attractive, even as secondary cities Brisbane and Perth continue to garner interest from investors to diversify their portfolio.
Director, Asia Pacific Capital Markets Research, JLL