Investment activity in the Asia Pacific region for commercial real estate fell significantly in 1Q2023, dropping by 30% y-o-y to US$27 billion. Global real estate consulting firm JLL noted that this was due to the tightening of lending standards causing further uncertainty. South Korea and Singapore were among the countries that saw the biggest declines in investment with 69.5% and 66.8% drops respectively.

Japan was the only country to buck the trend, recording an investment increase of 4.7% y-o-y. JLL’s report attributed this to headquarter building disposals from Japanese corporates and acquisitions by J-REITs.

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The fall in investment impacted all sectors – office investments dropped 26.6% y-o-y to US$12.7 billion, while logistics and industrial saw a 24% drop and retail investment totalled US$5.3 billion. JLL noted that the hospitality market had only seen US$2.4 billion in investments, down 30% y-o-y.

Price adjustments across the Apac region have been softer when compared to other areas such as the US, where asset prices have gone down by 20% to 40%, and Europe, where cap rates have expanded by 100 to 150 basis points. JLL highlighted that in Australia and South Korea, the average drop in prices had been 15% to 20% and 10% to 15% respectively.

Stuart Crow, JLL’s CEO, capital markets, Asia Pacific, is confident that the market will recover in due course, while Pamela Ambler, head of investor intelligence for Apac at JLL, added that the highest levels of price adjustment should peak in the second quarter of 2023. This could be followed by a moderating of prices in the latter half of the year due to a potential reduction in borrowing costs.