Asia Commercial Real Estate set to Boom

Transaction volumes of commercial real estate in the Asia-Pacific region are set to rise dramatically in the second half of this year, say analysts at Jones Lang LeSalle, as growth catches up with record set in 2013.

Volumes jumped 38 percent to $32 billion in the second quarter of this year, although they were still relatively flat compared to the levels in 2013.

"Over the quarter, we have seen direct investment into commercial real estate in Asia Pacific improve against the traditionally slower first quarter of the year, predominantly supported by some landmark portfolio deals in the region and larger Real Estate Investment Trust (REIT) privatisation," said Stuart Crow, head of Asia Pacific capital markets at JLL.

"As evidence of a strengthening leasing market gathers pace, and pent up investor demand from private equity groups, our 2014 forecast is that year-end volumes will be in line with the record levels we saw in 2013. We are expecting a very busy second half of the year," he added.

A single transaction which took place earlier this year – the Canada Pension Plan Investment Board (CPPIB) and Australian office landlord Dexus Property Group's joint acquisition of Australia's Commonwealth Property Office fund – was largely responsible for the pickup seen across the region in the second quarter.

The best performing markets in the Asia-Pacific were Hong Kong, South Korea and India. Hong Kong's transaction volumes surged to $1.8 billion in the second quarter, a 24 percent year on year increase. South Korea, which attracted strong foreign investor interest, saw transaction volumes climb an annual 26 percent to $2.9 billion.

"A string of foreign investor deals in the first half of the year highlights the country's improving fundamentals and the attractive debt terms on offer with the market being increasingly seen as a good alternative to the crowded traditional core markets," said JLL.

Investment in India is also strong, JLL said, driven by the fresh pro-business government and a stabilised rupee. Volumes in China improved in the second quarter to $4.9 billion, aided by better sentiment surrounding the economy's growth picture and credit concerns, but remain down 14 percent year on year.

Meanwhile, Singapore recovered from a slow start to the year, climbing to a record $2.1 billion in the quarter, a 4 percent increase from the year before. However, the market was down 18 percent in the first half of the year compared with the equivalent period in 2013.