Research - APRIL 24, 2017

Asia Pacific domestic investment up in 2016

by Jennifer Molloy

Asia Pacific property markets showed resilience in 2016, with heightened investment activity from domestic investors looking to avoid some of the world’s political and economic volatility on the heels of last year’s Brexit vote and US presidential election result, notes JLL’s Asia Pacific Capital Markets Research Report: March 2017.

In China, domestic real estate investment during 2016 totaled $29.1 billion, a 50 percent increase from 2015, states the report. Most transactions were in the Tier 1 cities of Shanghai and Beijing, but also in select Tier 1.5 cities (Chengdu and Chongqing). Corporates and property developers predominantly have led these acquisitions, with Chinese insurance companies also playing a strong role as they seek to allocate more capital in general to the real estate asset class. Greater regulatory constraints on capital outflows, too, have encouraged these Chinese insurers to outbid foreign investors on assets in China’s property markets.

South Korea’s real estate market also saw record transaction volume of $12.4 billion from domestic investors in 2016, a 75 percent increase year-over-year, according to JLL. These investors have been attracted to core and core-plus assets with long weighted average lease expiries. Domestic corporate and institutional investors also displayed a keen interest in buying office properties.

In addition to domestic interest in South Korea’s real estate markets, foreign investment in the country rose 282 percent in 2016 year-over-year, with these investors targeting higher-risk strategies. JLL suggests more such investment opportunities may arise from the restructuring of large Korean conglomerates looking to sell and leaseback noncore assets in an effort to improve their bottom lines.

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