Office deals in China driven by foreign investment rose to US$931 million in the second quarter, Cushman & Wakefield, the world’s largest privately held real estate consultancy, said Friday.
The figure accounts for 49 percent of all office investment in the mainland during the period.
A significant portion were cross-border deals. Among the most notable was Gaw Capital Partners’s US$928 million acquisition of Pacific Century Place, an office-cum-residential project in Beijing.
Block sales of prime offices in Beijing fell 44 percent to US$1.4 billion in the first six months compared with a year earlier after state-owned enterprises stopped buying prime office buildings.
Meanwhile, foreign investment in Hong Kong’s office properties surged 430 percent to US$440 million in the second quarter, taking up 29 percent of the market.
In Asia Pacific, office transactions rose 12 percent to US$15.7 billion in the three months to June from the previous quarter, a tad shy of last year’s record levels.
“Despite the prospect of yield compression, core assets in gateway markets remain an attractive proposition as they provide a safe haven and a stable stream of income, particularly for pension funds and insurers,” Sigrid Zialcita, Cushman & Wakefield managing director of research for Asia Pacific, said.
These assets are also a hedge against inflation, which is expected to rise as economic activity picks up in the United States and Europe, Zialcita said.
About 40 percent of regional deals were driven by foreign capital, worth US$6.2 billion, the highest for the region since the 2008 financial crisis. Core markets saw a rush on office assets.
“Almost 50 percent of cross-border office transactions were bound for the Australian markets. These were mostly dominated by investment funds, including private equity and pension funds, and real estate investment trusts, which contributed more than 60 percent of the funds invested,” the statement said.
Private equity giants KKR & Co. and Blackstone Group led investors from the Americas as the top originators of foreign capital in Asia Pacific, ploughing an estimated US$3.4 billion.
Hong Kong investors were the next most active thanks to significant deployment of funds by private equity firm Gaw Capital.
Australia drew the most foreign capital among Asia Pacific countries, followed by South Korea, while China ranked third and Hong Kong fourth.
In Japan, foreign investment in office properties grew 40 percent. Singapore saw a 93 percent fall.
Foreign investment accounted for 47 percent of Australia’s office deals and 69 percent in South Korea.
“Some of the divergence in the region’s markets is policy-driven, but we have seen a significant rise in activity in much of the region’s core markets,” said John Stinson, executive managing director of capital markets for Asia.
“However, this quarter, we are seeing significant deployment of dry powder in the private equity sphere in some markets such as South Korea. Australia looks to be on track for a record-breaking year.”
– Contact the reporter at [email protected]