Dealmaking activity in APAC’s real estate continues

(Chris Pilgrim Director, Global Capital Markets at Colliers)

Most major real estate markets across Asia Pacific (APAC) continued to perform well in the third quarter of 2022, despite the loss of some growth momentum in the face of difficult macroeconomic conditions marked by high inflation and rising interest rates, said a report by Colliers.

Major markets in China witnessed deals worth over USD4.79 billion, with transactions dominated by the office segment. Deals resumed in Hong Kong SAR despite Fed rate hikes, with transaction volumes jumped 133% quarter-on-quarter to USD5.27 million.

Although the strong momentum in the first two quarters slowed amid various economic headwinds, year-to-date investment volumes in Singapore touched USD16.7 billion, or 85% of the total recorded in 2021.

The real estate market in India enjoyed an upbeat quarter, with multiple segments in key Indian markets experiencing strong demand, and three en-bloc transactions worth USD500 million in Mumbai and the National Capital Region finalised. Japan witnessed the sale of an office building in Tokyo for a record-high price of over USD2.86 billion, and low rates and relaxing of border restrictions are expected to benefit real estate transactions.

Investment activity continued in Korea, with total office transactions reaching USD2.2 billion as Seoul office real estate continues to power the Korean market. Taiwan remains a relatively safe investment destination, witnessing transactions worth over USD900 million.

In Australia, Melbourne and Sydney recorded transactions worth nearly USD1.5 billion as ongoing flight-to-quality continues to underpin recovering office fundamentals, particularly across the Prime end of the office sector.

Looking ahead, Melbourne’s office market will enter 2023 with increasing occupancy, absorption of existing vacancy and relatively affordable rents, positioning the city as one of the most promising markets in Australia, Colliers said.

In Sydney, there are expectations of transactions picking up in Q4 2022 and Q1 2023 as pricing expectations among buyers and sellers start to converge. Trends such as the flight to quality and an increased focus on ESG are expected to continue, causing bifurcation between prime and secondary asset values.