Shanghai was the top city for real estate investment in Asia Pacific during the final quarter in 2016, and the fifth largest investment destination globally after New York, London, Los Angeles and Paris, according to figures published by property consultancy Jones Lang LaSalle (JLL).
Shanghai’s strong performance was driven by a number of high profile transactions, including ARA Asset Management’s US$2.91 billion investment in the Century Link complex in October, the biggest single-asset property transaction in Asia Pacific in 2016.
Meanwhile, in the retail property sector, the largest transaction of 2015 involved Chongbang Development conducting an 80% equity stake buyback of Shanghai’s Jinqiao Life Hub for US$825 million. Other notable deals include the SCPG Holdings Properties portfolio, purchased by China Vanke from Blackstone Group for US$1.9 billion.
"With political upheavals such as Brexit and the surprising U.S. election result, an increasing number of investors are looking at opportunities in Asia Pacific and specifically China," says Joe Zhou, Head of Research China at JLL. "Domestic capital was the main driver of real estate transaction volumes in 2016, with domestic investors often outbidding foreign investors in many transactions. We believe that China – particularly Tier 1 cities – remains attractive to foreign investors as the market matures."
Looking beyond China, total real estate transaction volumes in Asia Pacific grew by 5% in 2016 and 21% year-on-year in the fourth quarter, with certain countries in the region driving investment activity.
Real estate transaction volumes for the fourth quarter totaled US$15.5 billion in China, US$7.4 billion in South Korea and US$7.2 billion in Japan, as buyers aimed to close deals before the year-end.
The regional outlook remains positive with buoyant investor and occupier activity in 2017. "While the uncertain political environment of 2016 is set to continue into 2017, real estate assets continue to attract capital, preserve value and serve as a crucial part of a diversified global investment portfolio," says Dr. Megan Walters, Head of Research Asia Pacific at JLL.
"Continued appetite for real estate is expected to see investment volumes hold up, with core markets such as Sydney, Tokyo and Singapore attracting interest. We expect stronger activity in Indian real estate, with investors likely to be interested in Southeast Asian countries such as Vietnam and the Philippines that are showing better prospects on rental growth," he adds.