Office investment volumes in APAC hit record lows since 2007

Investments dropped 51% to USD7b in Q3.

According to a recent JLL report, APAC office investment volumes contracted 51% YoY to USD 7bn in Q3 2023, the lowest level ever since records began in 2007. 

Australia, Japan, Singapore and South Korea all experienced decline in office transactions from a year ago, while China and Hong Kong recorded volume growth, benefitting from the low base effect. 

Here’s more from JLL:

Transaction activities were driven by end-user demand with more corporate occupiers acquiring office assets for their own operational usage. Investors were lukewarm about office investment owing to concerns about weakening demand, vacancy levels and hybrid adoption. The poor sector outlook and higher cost of capital made investors re-assess their investment strategies, with some seeking to diversify to other sectors for higher returns and to mitigate concentration risk.

Re-pricing pressure for office assets persisted, with many investors expecting prices of prime office buildings to correct downwards by 5-10%. As such, yields are predicted to continue to soften over the coming quarters and the investment market would remain illiquid. 

• Australia: prime yields near their cyclical peaks and would stay at these levels over the short-medium term. 

• China: more distressed selling anticipated, leading to asset depreciation and further yield decompression. 

• Hong Kong: capital values to drop by 5-10% and yields to expand moderately amid the high interest rate environment. 

• Japan: yields to remain stable while interest rates are kept low. 

• South Korea: tight liquidity amongst domestic investors could lead to more buildings trading at higher yields. 

• Singapore: further decline in asset prices as interest rates remain elevated for longer.