China leads Asia Pacific for commercial property

China has overtaken Japan to become the leading Asia-Pacific nation for investment in commercial real estate, with volumes more than doubling in the second quarter of 2015.

According to a report by international real estate firm JLL, China’s commercial real estate transactions rose 54 per cent to US$7.9 billion in the three months to June, compared to the same period a year ago.

The liquidity in China was driven by funds seeking top-grade assets with strong yields, the report said, while sentiment improved in tier-one cities such as Guangzhou and Shenzhen.

“Recent volatility seen in the China equity market may potentially slow [the] investment decision process and lead to more outbound investments,” Megan Walters, JLL’s head of research for the Asia Pacific, said.

“However, the impact may be mitigated by the trend towards lower interest rates and bank reserve requirement ratio, which will likely reduce costs of borrowing and provide support for China’s real estate investment market.”

Commercial transaction volumes in Japan dropped 23 per cent year-on-year to US$6.4 billion. However, Ms Walters said there is still ample liquidity for the nation as more equity funds were raised in the June quarter, and foreign investor demand remains at an “unprecedented level” on the back of a weak currency.

Australia’s commercial transaction volumes were down 44 per cent year-on-year to US$4.4 billion, which the report said was due to several factors, including investors wanting to see the outcome of the Investa Property Group platform sale, limited availability of good quality stocks, and a lower Australian dollar masking transaction volumes measured using the US dollar.

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