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Q3 Commercial Property Market Stabilised on Portfolio Transactions


November 7, 2016



Asia Pacific’s commercial real estate market stabilised in the third quarter, declining by a marginal 1.1% year-on -year in the quarter, with USD 30.4 billion of income-producing investments were recorded in the July to September quarter. Development site sales, a key aspect of the Asia Pacific real estate universe, reached USD 76.3billion in the quarter, according to research by Real Capital Analytics.



Investment activity in the quarter was largely driven by a number of portfolio transactions in China and Japan, potentially masking a lack of liquidity in Asia Pacific.



Portfolio deals collectively counted for 43% of overall volumes in the region. As a result, the market saw fewer active buyers and deals completed. Primary concerns such as interest rates hikes, emerging economy bond markets, and political risks are still challenging investment decisions, the RCA research found.





China outperformed the rest of the region, recording USD10.0billion in direct real estate transactions, up 28% year on year. With now one-fifth of the overall activity in the region, China has overtaken Australia to become the second most active Asia Pacific market.



Cross-border activity continued to grow and accounted for 33% of total volume in the third quarter. This increase is largely caused by a decrease of total purchases by domestic investors, rather than a strong expansion in cross-border capital. In fact, domestic investment volumes declined by 8% year on year to USD 19.0 billion, RCA said,  adding much of this decline in domestic activity was due to strong Asian outbound capital into global markets such as the U.K., U.S. and continental Europe.


Asia Pacific yields remained largely stable over the quarter. One exception was Australia where property yields compressed by additional 20 basis points across all asset classes and geographies, pushing pricing closer to its 2007 peak levels.



In contrast, in Japan, yield compression slowed down dramatically as commercial property yields reached their peak levels and market activity tapered, RCA said. Due to aggressive pricing, foreign buyers are struggling to compete with strong domestic competition and as a consequence became net sellers for the first time this cycle, the research agency said.


By Staff Writer, APMR News

Article  Published on : 2016 November 7, 19:45 pm GMT+800

Article  Last Updated : 2016 November 8, 11:10 am GMT+800

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"Investment activity in the quarter was largely driven by a number of portfolio transactions in Japan and China, potentially masking a lack of liquidity in Asia Pacific." -- RCA

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