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APAC property transaction volumes up; regional REITS top USD100 billion
Real estate transaction volumes in Asia-Pacific have continued their upward trend that started in early 2009, although volumes declined 23 percent quarter-on-quarter to USD21.4 billion in the first quarter of this year, according to a report produced by the Asia Pacific Real Estate Association (APREA), which promotes and represents the real estate sector on a regional basis, and Real Capital Analytics (RCA).
Peter Mitchell, CEO of APREA, says, “All major markets in Asia experienced this fall in transaction volumes in the last quarter, with the exception of Japan where the volume actually increased by 122 percent. The majority of the transactions are coming from Japan, China, Hong Kong and Singapore.” “However, the overall clear trend over the last two years is the substantial increase in transaction volumes in Asia and the increasing activity amongst domestic players and the correspondingly diminishing level of cross-border activity”.
Global transaction volumes dropped in the first quarter of the year by 31percent. However, the total transaction volume was the second highest since the third quarter of 2008. Asia-Pacific transaction volumes contributed to 22.4 percent of the global total, up from 15 percent recorded in the fourth quarter of 2010. All sectors in the region experienced a fall in transaction volume, except for residential apartments which saw an increase of 10 percent.. According to the report, movements in Asia Pacific cap rates were mixed over the quarter with retail, office and apartment cap rates showing signs of easing. Industrial, and particularly hotel, cap rates showed signs of tightening.
The first quarter of 2011 also saw a pronounced decrease in cross-border acquisition activity, both intra Asia Pacific and from outside the region. In fact, cross-border transaction activity has reduced substantially since third quarter of 2008 and the level in the last quarter is the lowest since RCA began capturing Asia Pacific transaction data four years ago. Domestic players continue to dominate as buyers (91 percent) and sellers (73 percent).
According to the report, major transactions at the beginning of the year included Otemachi PAL in Japan, Capital Square in Singapore, The Fifth Square in Beijing and The Centre in Shanghai. APREA also reports that market capitalization of the Asian REIT market (ex-Australia) has topped USD100 billion for the first time, reaching USD101.1 billion as of April 29 this year. The market has recovered well since the peak of the financial crisis when it stood at USD66 billion in March 2009.
In its latest Asian REITs monthly report, it says that the upturn is due partly to the recovery in Singapore where the market cap increased from USD7.8 billion in March 2009 to USD31.8 billion over this period, an increase of 307.7 percent. It is also due to new listings, including the recently listed Mapletree Commercial Trust in Singapore and Hui Xian REIT in Hong Kong, the 15th largest REIT in the region.
Peter Mitchell, CEO of APREA, notes, ‘With announced acquisitions and other rumoured IPOs in Japan, Singapore and Malaysia, the continued strong growth in the overall size of the Asian REIT market looks set to continue. In addition, the space of less than 10 years Asian REITs have become a significant product in the global real estate universe and the market is now significantly larger than the Australian REIT market.”
Looking at the Asia-Pacific REIT market, including Australia, The A-REIT (45.5 percent), J-REIT (24.5 percent) and S-REIT (17.3 percent) markets account for 87.3 percent of the market on a capitalization basis, which at USD187.9 billion, was still 8.3 percent below the peak attained in October 2007, due to a continued lag in Australia.
In addition to Singapore, strong growth was seen in Japan and Hong Kong. From March 2009 to April 29, 2011, the market cap of Hong Kong REITS increased by 156.4 percent and J-REITs by 96.3 percent.
The 20 best performing Asian REITs (by 12-month total return) comprise eight J-REITs, six Hong Kong REITs, one S-REIT, two Taiwan REITs and three Thailand REITs. By contrast, the worst performing Asian REITs (by 12-month total return), all with negative returns, include eight Thailand REITs, five J-REITs, four S-REITs and one Korean REIT.
Japan REITs continue to make up the majority of the worst performing Asian REITs, by three-year total return. Over a longer period (of three years), stocks from some of the smaller markets have outperformed with REITs from Malaysia (5), Thailand (3) and one Taiwan REIT featuring in the top 20, alongside Japan, Singapore and Hong Kong.
