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April 27, 2017

When it comes to Asia Pacific’s commercial real estate market, investors have their sights set on three specific, and very different, countries.

Following news that India hit US$2.3 billion in real estate investment last year, the start of 2017 has already proven lucrative for the Indian market as the first quarter which ended March saw a rush of private equity deals.

And, experts at JLL expect more investment into the country as Prime Minister Modi exerts his control over both houses of Parliament, allowing for quicker reform. With the Real Estate (Regulation & Development) Act, taking effect on May 1, more transparency is also expected in the sector, which would further boost investment prospects.

Besides India, international investors looking towards Asia Pacific are also upping their momentum in Australia. “Cross-border buyer activity accounted for 40 percent of the quarterly total for Australia, and we expect offshore capital inflow to remain a supportive driver of investment volumes,” says Simon Storry, Head of International Investments at JLL Australia. “New pricing benchmarks are also likely to stimulate vendor motivation in the office sector in Australia, as a number of large campaigns will commence in the next quarter in Sydney and Melbourne.”

In Singapore, the much-talked about bottoming out of the country’s property cycle has seen bargain hunters eager to make their move. “Assets on the market, such as Asia Square 2, will provide products for core funds,” says Myles Huang, from JLL’s Asia Pacific Capital Markets Research team. “Elsewhere in Southeast Asia, Chinese investors are likely to make a play for projects related to China’s One Belt One Road initiative.”

Huang adds that in other markets, however, deal availability will hinge upon whether there is enough physical stock available. “The investment market in China and South Korea may be quieter as we have witnessed a very high amount of stock on the market over the past 12 months. Similarly, domestic owners in Japan are unwilling to sell because of reinvestment challenges.”

When it comes to capital rate trends, core real estate yields will continue to stay low and yields in some of the region’s markets might even compress further when compared with their long-term ranges. There is a likelihood of further yield compression in Hong Kong, as a result of continuing price growth, and in Singapore and India given the level of investor interest.

According to Huang, these cumulative market conditions should position Australia, Singapore and India to see stronger momentum in investment activity over the next six to 12 months, while Japan and Greater China will likely see stable trends. “There is more interest in Southeast Asia but opportunities for development are more common than asset sales. The consensus is direct commercial real estate investment activity regionally will remain stable throughout 2017,” he says.

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Myles Huang

Asia Pacific Capital Markets Research Drector, JLL

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