Property investment in Asia-Pacific likely to hit record next year as economic recovery from coronavirus boosts confidence, analysts say

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Property investment activity in Asia-Pacific is poised to hit a record high next year as confidence returns amid an economic recovery from the Covid-19 pandemic, according to Knight Frank.

The region will see investment volumes grow by a third, largely driven by a re-emergence of US investment managers’ and private equity firms’ appetite for offices, said the international real estate consultant.

In its Active Capital Report, which tracks trends in international real estate investment, Knight Frank said the United States, the UK, Germany, France and the Netherlands will be the top destinations for cross-border investment in 2022.

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“A resurgence of investment flows into real estate, hitting record pre-pandemic levels in key sectors including offices, logistics and residential, signals a marked return of investor confidence,” said the report released on Wednesday, which tracked fund flows in 286 cities.

Transaction volumes across the Asia-Pacific have surpassed US$160 billion in the first three quarters of the year (including contracted deals), according to Colliers. This was significantly higher than last year and up 14 per cent from the previous record in 2019.

“We are on track for a record year in 2021,” said Terence Tang, managing director of capital markets and investment services for Asia at Colliers.

Growth in investment is being generated by a number of new drivers, including increased activity in the corporate sector, surging volumes of alternative asset classes and strong growth in the logistics sector, he said.

“While investment volumes in 2021 are likely to be 15 to 20 per cent higher in Asia-Pacific as most economies are gradually recovering, we expect 2022 to be even stronger as trade flows improve further, travel restrictions are rolled back and consumer sentiment becomes more positive,” said Regina Lim, head of capital markets research for Asia-Pacific at JLL.

In fact, in the third quarter of this year, investment volumes in Europe, the Middle East and Africa (EMEA), and the US surged to near-record levels as governments became more aggressive in opening up their economies than Asia, she said.

“We think a similar trend could occur in Asia in the coming quarters,” Lim added.

Foreign demand for Asian property has bounced back from earlier this year.

On Monday, AXA IM Alts, a global leader in alternative investments with 163 billion of assets under management, announced it had acquired a portfolio of two residential assets in Osaka, Japan, from PGIM Real Estate Japan, the asset management arm of American life insurance company Prudential Financial, for 10.6 billion yen (82 million).

Singapore-based CapitaLand bought Minhang Data Centre Campus in Shanghai for US$566.6 million, according to a Savills investment report in the second quarter.

“The results from this year’s [Active Capital] report are a welcome sign of the continuing recovery in the region, linked to the resurgence of global cross-border investment into real estate,” said Neil Brookes, head of global capital markets at Knight Frank

“Indeed, as the world moves into the next phase of living with the pandemic, we could see a roaring 20’s effect for real estate in 2022.”

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