Today, in 2024, the total investment in commercial real estate in the Asia-Pacific region reached $27.3 billion in the second quarter, an increase of 2% year-on-year, achieving positive growth for the third consecutive quarter. In the first half of this year, the total investment in commercial real estate in the Asia-Pacific region reached $57.5 billion, an increase of 7% year-on-year.

In the second quarter, the investment in office buildings in the Asia-Pacific region reached $10.7 billion, still the most active asset category. Retail properties and hotel transactions also continued to achieve year-on-year growth. In the first half of 2024, the transaction volume of retail properties in the Asia-Pacific region increased by 12% year-on-year, reaching $4.6 billion; hotel transaction volume increased by 19% year-on-year, reaching $5.7 billion.

Stuart Crow, CEO of Investment and Capital Markets at Jones Lang Lasalle for the Asia-Pacific region, stated that the borrowing costs in most markets in the Asia-Pacific region are still high, putting pressure on the repricing of office buildings, retail properties, and logistics real estate in the region. Despite ongoing financing challenges for global investors, the transaction volume of office buildings in the Asia-Pacific region continues to grow. Coupled with strong rental growth in many prime locations, and the expectation of a decline in bond yields in the coming quarters (except in the Japanese market), the expected return on investment in commercial real estate is expected to improve. These factors are expected to further boost investor sentiment.

Japan is the most active market in the Asia-Pacific region, with a transaction volume of $5.8 billion in the second quarter, benefiting from a significant increase in hotel asset transactions. Australia and Singapore had investment volumes in the second quarter of $5.4 billion and $1.9 billion, with year-on-year growth rates of 73% and 31% respectively; meanwhile, investment in South Korea in the first half of 2024 decreased by 5%, with a second-quarter investment volume of $3.5 billion.

The investment volume in mainland China in the second quarter was $4.9 billion, an increase of 5% year-on-year. Overseas institutional investors remain cautious about Chinese commercial real estate, and investment activities are mainly driven by domestic funds, especially in the office building category, where buyers are mainly from csi all share investment banking & securities companies, energy, retailers, and government platforms. In the second quarter, the transaction volume of retail properties in mainland China ranks high in the Asia-Pacific region.

With the government expanding the scope of REITs pilot programs to include department stores and shopping centers, there may be more transactions involving retail properties in prime locations in the future. Long-term rentals are still attractive to investors, with several related transactions recorded in Shanghai in the second quarter. Foreign institutional investors and domestic insurance companies are seeking opportunities to acquire highly visible assets currently being sold by some developers.

Jones Lang Lasalle's Head of Investment and Capital Markets in China, Shudong Pang, pointed out that we have observed that the tourism market is accelerating its recovery, with an expected domestic tourism number of over 6 billion, a 23% year-on-year growth. At the same time, the expansion of China's visa-free 'circle of friends' is further boosting inbound tourism, bringing strong demand for high-end hotels in business and travel gateway cities. With the dual growth of domestic and external demand, the domestic hotel investment market has received more attention. Hotels in top-tier destination markets such as Beijing and Shanghai are being sought after by various investors due to their scarcity and good liquidity.

Shudong Pang continued, on the office building property level, we expect stand-alone and scattered sales products to continue to be favored by self-use enterprise buyers. At the same time, we also noticed that foreign funds and state-owned platforms are actively acquiring office and industrial park assets in Shanghai. Against the background of the Shanghai office market prices gradually returning to rational levels, the acquisition of these assets can bring stable cash flow income, meet certain self-use needs, and help these enterprises increase their exposure and promote investment attraction activities.