Thursday, May 6, 2010

Asian office and investment property strong in Q1: CBRE

But deals slip in Greater China, with sentiment hit by govt cooling policies

OFFICE and investment property markets across Asia remained buoyant in the first quarter of 2010 as investor sentiment stayed positive, CB Richard Ellis (CBRE) said yesterday.

In the investment market, the steady flow of small and medium-size transactions seen in the second half of 2009 continued to feed through into this year.

Total direct real estate investment in Asia jumped 215 per cent year on year to US$16.5 billion in Q1 - from a low base in Q1 2009 when activity was muted.

Despite the strong year-on-year growth, transaction volume slipped in China, Hong Kong and Taiwan quarter on quarter.

This dip in Greater China was because investors turned cautious after government policy changes to cool rapidly rising prices.

Elsewhere in Asia, Japan, Korea and Singapore saw a strong rebound in investment activity quarter on quarter, with the volume of transactions in these markets rising 45, 32 and 24 per cent respectively.

Throughout Asian investment markets, transactional activity was largely driven by domestic investors, who accounted for 72 per cent of total volume. But the US$12 billion of transactions completed by domestic investors was US$2.1 billion lower than in Q4 2009 - signalling a rise in cross-border investments.

The rising proportion of cross-border activity in Q1 2010 was partly due to the return of international real estate funds, CBRE said.

'The quarter saw both opportunistic and core international institutional investors return to Asian real estate markets, attracted by signs of a sustained recovery,' said Andrew Ness, executive director of CBRE Research Asia.

'At the same time, well-capitalised Asian Reits and sovereign wealth funds resumed the portfolio expansion they halted during the most severe period of the global economic downturn, and their return was marked by a rising level of acquisitions in Japan and Singapore.'

In the office sector, a recovery in demand was reflected by growth in net absorption for the region overall - it was 31 per cent higher in Q1 2010 than Q4 2009.

Most cities surveyed recorded positive absorption of space, and the overall vacancy for Asian cities declined 80 basis points quarter on quarter to 11.8 per cent.

Rents continued to fall - but more slowly. CBRE's data shows overall office rents in Asia fell 0.1 per cent in Q1 - much less than the previous quarter's 1.9 per cent decline.

Mr Ness said office leasing activity is expected to turn robust in the current first half and lead rents out of the downward cycle as more companies boost real estate budgets to support overall regional expansion plans.

Source: Business Times, 6 May 2010

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