Commercial real estate investment in Asia Pacific rose 2% year-on-year (YoY) in Q2 2024 to US$27.3 billion, marking the third consecutive quarter of growth for the region. According to data and analysis by global real estate consulting firm JLL, H1 2024 investment volumes totalled US$57.5 billion, a 7% increase from the same period a year ago.
The office, hotel, and retails lead the charge: Office remained the most active sector, with Asia Pacific office volumes reaching US$10.7 billion in Q2. Growth led by offices was supported by retail and hotels, which continued to record volume growth from a year ago. Asia Pacific retail volumes rose 12% YoY to US$4.6 billion and hotel volumes grew 19% YoY to US$5.7 billion for H1 2024.
“The cost of borrowing remains continues to weigh on sentiment across Asia Pacific. Despite this, the region’s office sector has seen renewed transactional activity and momentum across larger deals has improved,” says Stuart Crow, CEO, Asia Pacific Capital Markets, JLL. “Coupled with strong prime rental growth in many markets and anticipated rate cuts, return expectations are set to improve, further boosting investor sentiment.”
Cross-border investment: Cross-border investment volumes in Asia Pacific registered US$7 billion in H1 2024. Cross-border capital favoured hotel investment strongly. In Q2, China and Hong Kong became predominantly domestic markets, as foreign investors adopt a wait and see approach.
Singapore (US$1.9 billion) and Australia (US$5.4 billion) both recorded YoY growth in investment volumes, up 31% and 73% respectively. In Singapore, strata sales dominated office transactions, with occupiers and family offices actively seeking investment opportunities. In Australia, capital allocation towards office and industrial assets rebounded strongly following several large institutional sales, with industrial volume reaching its highest quarterly level since Q4 2021, and the office sector at its highest level since Q3 2022.
Southeast Asia a bright spot for data centers: Data centers have also emerged as a bright spot, particularly in Southeast Asia (SEA), where investment into SEA data centers made up 52% of Asia Pacific investment volume. Southeast Asian countries become prized data centre investment locations due to their relatively lower cost of land, labour and electricity, translating to operational efficiency and competitiveness for data centre providers.
“With expectations that the US Federal Reserve will lower interest rates in September growing, we expect an easing of borrowing costs to follow for some markets in the region,” said Pamela Ambler, Head of Investor Intelligence, Asia Pacific, JLL. “Coupled with the buzz in Southeast Asia’s data center sector and a more conducive monetary policy, we are feeling more bullish on the prospects for commercial real estate investment in the region.”
