Savills Research July, 2024: Asia Pacific Q2/2024 Investment Quarterly
Savills reviews investment activity in Asia Pacific and 15 of its major investment markets for Q2/2024.
Oxford Economics revised Asia Pacific’s real GDP forecast up to 3.9% in Q1. Despite this, investors were cautious in Q2/2024 and scaled back investment by 28.1% y-o-y. Investors’ preferred assets have also shifted. One year ago, offices and industrial shared the top spots for transactions. In Q2/2024, hotel investments doubled, from 8% of total volume to 17%. That indicates a shift to alternate assets with favourable yields. With rate cuts on the horizon, APAC markets are poised for gradual recovery beyond Q2. However, US election results and persistent geopolitical tensions could negatively impact that recovery.
Regional Engines China and India on Divergent Paths
China’s sluggish economy sparked to life in Q1/2024, but its property markets continued to slump. To prevent real estate from undermining the overall recovery new policies were rolled out in Q2. The aim is to relax home purchase restrictions, lower mortgage rates and improve developer liquidity. Despite challenges, retail volumes grew by 35%, hotel by 79% and multifamily residential by 48% y-o-y.
India remained remarkably resilient in Q2. Elections provided political stability and ensured supportive infrastructure development. Private equity investors injected US$1.1 billion into the sector in Q2, contributing to a 42% increase y-o-y. Offices accounted for 51% of investments in Q2, with residential taking 47%. APAC investors were the most active, representing 70% of total inflows. India is projected to be the world’s third largest economy by 2027.
Japan Continues to Shine and Australia Rebounds
Wide yield spreads are maintaining Japan’s position as an investor preference. Grade A offices continued to post improving rates in Q2/2024, supported by corporate expansion and strong profits. Rents increased 1.1% q-o-q and vacancy fell to 2/9% in C5W. The evaporation of the negative rate environment prompted increased interest in the residential sector. Hotels performed well thanks to robust tourist arrivals.
In Australia, higher interest rates, persistent inflation and cost-of-living concerns are weighing on domestic consumption. However, investment in Q2 grew 33% higher than its previous trough. Major office transaction prices suggest values are trading at a discount as high as 25% from peak. Opportunistic capital, syndicators, select institutions and offshore entities are driving recovery in investment activity.
SEA Markets Still Resilient
Malaysia, Indonesia, Pakistan, Philippines and Vietnam underpinned APAC’s resiliency in Q2. Malaysian investment surged on the strength of retail and data centre demand. Buoyed by an active MICE sector, Indonesia’s hotel market continued its accelerated growth in Q2. In Pakistan, Lahore’s rising status as a commercial hub resulted in significant Grade A and B office investment. Occupancy averages between 80% and 95%. Demand in Metro Manila easily absorbed 210,000 sq m of office space released in Q2, increasing vacancy by just 0.4%. Vietnam faced the same inflationary and geopolitical challenges as most markets. However, both were mitigated by strong FDI and infrastructure investment.
Major Transaction Volumes Reflected Investor Caution
Caution among investors led to nearly 30% fewer transactions in Q2 than during the same period one year earlier. Investment in China contracted 9.5% in Q1 and prompted new policy initiatives to sustain economic growth. Despite challenges, transactions in China in Q2 totalled US$2.2 billion. Regionally, that was followed by Australia at US$1.54 billion, and Japan and Singapore with US$1.2 billion. Hong Kong and South Korea posted US$550 million and $437 million in volumes respectively. Taiwan recorded US$254 million in major transactions in Q2.
To read the complete Asia Pacific Q2/2024 Investment Quarterly, please visit: http://sav.li/b2d
