HK commercial property owners looking to make the most of high capital values: report

2016 APAC real estate opportunities abound.

It has been observed that real estate markets in Asia Pacific are expected to deliver strong total returns in the next three years driven by a huge weight of capital coming into the region. And with global stock markets expected to experience heightened volatility this year, real estate investment is likely to see even more interest.

According to a research note from JLL, there are opportunities to acquire high-quality real estate assets in China and Japan’s regional cities, based on JLL’s latest Asia Pacific capital markets research. Prime CBD office assets are also being sold in Singapore, while commercial property owners in Hong Kong are looking to capitalise on the high capital values to lock-in high exit values. 2016 should also see investor interest improve in India and Korea.

For JLL, it saw record transaction volumes of more than US$120 billion in 2014, followed by US$125 billion last year. This year, it expects to see an incremental increase in volumes across the region.

Another positive sign for the industry is that the amount of private equity available for real estate investment stands at near-record levels, implying another buoyant year for investment activity. The amount of capital raised by Asia-focused funds totalled US$10 billion in January to November, 2015 - up more than 130% year-on-year.

Here's more from JLL:

Stuart Crow, Head of Capital Markets in Asia for real estate expert JLL, said: ‘’We’ve got some of the world’s largest investors looking to increase their allocation to real estate and direct real estate. Many are increasing their allocation to Asia Pacific and also rebalancing their portfolios away from fixed income and equities.’

Not only is capital coming into Asia from outside investors, but much of it originates from Asia itself as wealth grows within the region. ‘’In fact, more than 80% of transaction volumes in Asia Pacific are done by Asian investors. Capital has accumulated within pension funds, insurance funds and sovereign funds, particularly in China,’’ added Crow.

Despite the economic headlines in China, investment activity should remain at a similar level to 2015, according to JLL. While the Chinese economy shifts away from export-driven growth towards domestic consumption, there are plenty of opportunities for savvy investors. Crow added: ‘’Investors have seen the Chinese economy advancing away from manufacturing towards a service-based economy and to some extent that’s attracting investors, particularly in the logistics sector’’.

China, along with much of Southeast Asia, is experiencing rapidly-growing domestic consumption as their middle class populations expand. Another sector that is in the sweet spot of this trend is the retail sector. ‘’It’s a hugely attractive sector particularly in growing markets as it becomes a more mature sector for many of our investors,’’ said Crow.

Asia Pacific is a key driver of global growth and businesses are continually establishing head offices and outsourcing centers in the region. From Mumbai to Melbourne, multinationals are increasingly managing sprawling global operations. As global growth moderates, there is growing pressure on companies to look at the true cost of occupancy.

Angela Newby, Managing Director of Transaction Management, Asia Pacific, Corporate Solutions for JLL, explained: ‘’The core business stakeholder is now asking the corporate real estate function - How can real estate grow our business? It’s also looking at how we can attract the best talent. How can we then retain that talent and how can we then engage that talent, the employee engagement thereafter? The real estate function is being asked how they can help deliver on that.’’