“Asia Pacific real estate transactions are bouncing back and many of the investors we speak to are more upbeat about prospects in this region,” says Simon Smith, head of Asia Pacific research and consultancy at Savills.

The RICS Global Commercial Property Monitor survey found Asian respondents’ expectations were generally more optimistic for 2021. Headline rents were expected to decline 2.3% this year across Asia Pacific, compared with a predicted fall of 3.4% globally, while capital values are expected to fall 1.7% over the same period, compared with 2.4% globally.

Data from Real Capital Analytics show Asia Pacific transaction volumes recovered sharply in the final quarter of 2020, down only 10% from Q4 2019, compared with a 23% fall for the whole year. South Korea, India and Taiwan set new annual records for transactions. In contrast, while down 27% across the whole of 2020, European deal volumes fell 44% in the final quarter, showing the region was still mired in the pandemic.

“Cross- border investors broadly maintained their share of investment, particularly in Japan where restrictions on movement were not as severe as in the rest of Asia Pacific,” says David Green-Morgan, managing director, Asia Pacific, at RCA.

Real estate private equity funds continued to raise capital during the pandemic and the 10 largest Asia Pacific funds to close last year raised more than $10 billion in aggregate, according to Preqin data. Meanwhile private equity real estate dry powder committed to Asia Pacific strategies totalled $40.4 billion at the end of last year.

ANREV’s 2021 investment intentions survey found more enthusiasm for Asia Pacific amongst investors than for other regions. The survey found 22% of investors planned to increase their investment in Asia Pacific this year, compared with 16% for the US and 13% for Europe. Over two years, the enthusiasm for Asia Pacific is even greater, with 77% of respondents planning to increase their allocation to the region.

The industrial sector, which saw transactions exceed $30 billion for the first time in 2020, was the only sector to show an increase in transactions, however ANREV reported the office sector to be the most popular with investors, who also preferred core markets and strategies.

While institutional investors have plumped for developed markets, such as Australia, Japan and South Korea, India is proving highly popular with some of the world’s largest real estate investors and saw deal volumes more than triple last year. Outsourcing hub Bangalore saw a remarkable tenfold rise in investment volumes, a rise aided by Blackstone Group buying $1.6 billion portfolio from Prestige Group.

According to Arvind Nandan, head of research and consultancy at Savills India, private equity investors tended to be cautious in 2020 and will continue to be so in 2021, however interest will continue in the office and residential sectors, and particularly the industrial sector. “Savills Research estimates that warehouse leasing activity in the country will increase by 60% in 2021 as compared to 2020, keeping investors riveted and on the lookout for investment opportunities,” he says.

“India has progressively taken steps to create an enabling business environment and encourage investment. Foreign and domestic capital has reaffirmed the untapped potential of the country.”

Further reading:
Savills Singapore