RETAIL INVESTMENT | Tony Chua, Singapore

Asia Pacific investment activity rose by 37%

China developers' rush to close land deals as authorities tighten lending conditions pushes region's investments up.

The volume of commercial real estate investments transacted in Asia Pacific increased by 37% from US$28.2bn in Q4 2009 to US$38.6bn in Q1 2010.  The announcement by the Chinese authorities of tighter lending conditions in the future encouraged investors to bring forward purchases.  Elsewhere the improving economic conditions in the region helped drive investment activity.  This quarter’s transactional activity outstripped the previous peak in Q3 2007, according to DTZ research published 19 April 2010.

Commenting on the figures, David Green-Morgan, Head of DTZ Research, Asia Pacific said: “Asia Pacific’s investment market is buoyant. While domestic investors remain the most active players we are starting to see interest from foreign investors, who are slowly returning to the market. However, this quarter’s transactions were dominated by developers in China grabbing land in anticipation of tighter bank lending.”

The sale of Games City in Guangzhou, China for US$3.7bn was the largest deal since 2007 followed by a handful of mixed use development transactions with large lot sizes. China continues to increase its share of total volumes in Asia Pacific accounting for 65% of investment volumes in Q1 2010. However, the overwhelming majority of these are land deals, in Q1 land deals accounted for 97% of all transactional activity in China.

Investment activity in the region was also boosted by the return of successfully recapitalised REITs.  In the first quarter of the year, REITs in Asia Pacific spent US$2.4bn.  Despite sales of almost US$2bn this marks the first quarter since the final quarter of 2008 that REIT’s have been net buyers.

Activity continued to be driven by China, Japan and Australia, which when combined accounted for 92% of volumes in the first quarter. Investment in Japan more than doubled from US$3.2bn in Q4 2009 to US$7.2bn in Q1 2010 driven by five transactions above US$400 million. Volumes in China increased by 39% from US$18.1bn to US$25.2bn over the same period. Positive sentiment and continued good news on the economy led to an increase in volumes from US$1.9bn in Q4 2009 to US$3.0bn Q1 2010 in Australia.

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