South Korea, Japan lead commercial real estate recovery in Asia in Q3

The increase in APAC investment volumes was driven by China (-10% yoy), South Korea (-2% yoy) and Japan (-18% yoy).

Commercial real estate markets in Asia Pacific had a better third quarter this year than second quarter, led by investment in China, Japan and South Korea.

Asia Pacific investment volumes hit $35 billion between July and September, compared to $26.1 billion in the previous three months of 2020, according to JLL.

While third-quarter volumes were still down 19 percent from the period last year, the quarterly uptick was enough to garner a few sighs of relief in what has been a bruising year dominated by the global health crisis.

"The first major signs of a resumption of investment activity emerged in the third quarter, with investment volumes showing meaningful improvement,” says Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL. “While uncertainty will remain for the foreseeable future, we believe that low transactional activity has bottomed out, and our optimism for the fourth quarter continues to grow.”

The quarter-on-quarter acceleration in activity was driven by China (-10% year-on-year), South Korea (-2% year-on-year) and Japan (-18% year-on-year).

In Japan, notable deals included Blackstone’s purchase of a four-asset portfolio of logistics assets from Daiwa House for $523 million and Allianz’s acquisition of a Tokyo multifamily assets for $160 million.

In Korea, the Hyundai M&F headquarters was sold for record price to a domestic investor, while Singapore-based Mapletree’s acquired the Pinnacle Tower in Seoul.

But it was China that took the bulk of the region’s investment, as the country’s economic recovery continues to outpace the rest of the world. In a quarter when most economies contracted, the world’s second-largest economy grew 4.9 percent.

Domestic investors remain the predominant source of capital, but larger cities like Beijing have been drawing foreign investors as well, says Julien Zhang, Managing Director, North China, JLL.

“In the third quarter, 70 percent of the transactions in Beijing involved foreign investors. Almost half of the transactions done in the city so far this year have involved foreign investors, demonstrating the global appeal of this market,” he says.