Institutional flows to APAC property in Q3 lowest in 13 years

The $21.3 billion allocations to APAC property in the quarter ended September represented a fall of 22% from the same quarter a year ago, a report by JLL showed.
Institutional flows to APAC property in Q3 lowest in 13 years

Institutional investor flows into APAC property in Q3 fell to their lowest since the second quarter of 2010, according to JLL’s recently released Asia Pacific Capital Tracker.

The $21.3 billion total allocations to APAC property represented a fall of 22% on the same quarter one year earlier, as investors continued to shun office and retail sectors, especially in Australia and South Korea, where total flows fell 47% (to $3.8 billion) and 35% (to $4.2 billion), respectively.

China, however, bucked the trend, with investor allocations to the mainland up 43% on a year earlier, reaching $4.7 billion.

“Despite a strengthening return to office narrative and low vacancy rates in many markets, investors remain generally more cautious on the office sector. The high cost of debt has also exerted repricing pressures and most markets remain in price discovery mode as investors adjust their targeted returns for acquisitions,” said Stuart Crow, CEO, Asia Pacific Capital Markets, JLL, upon publication of the data.

Benjamin Chow

“The fall in activity from the levels in the first half of the year reflects the resurgence in uncertainty relating to the interest rate outlook. The narrative of a “higher for longer” interest rate environment put a dampener on hopes of an early recovery,” Ben Chow, head of real estate research Asia, at MSCI, told AsianInvestor.


APAC cross-border flows plummeted 66%, to $2.5 billion, and would have slumped further were it not for Singaporean investors seeking geographical diversification.

This group alone accounted for 56% of total cross-border flows, including large acquisitions in Australia and South Korea.

The appeal of APAC’s property market to investors from the US is particularly muted currently, with US investors avoiding Japan, China and Hong Kong entirely during Q3, according to the JLL data.

“Repricing is lagging in Asia Pacific compared to US and UK. As a result, we are expecting to see a further repricing in the coming two quarters,” Henry Chin, global head of investor thought leadership and head of research, Asia Pacific, at CBRE, told AsianInvestor.

But he added that delayed price falls in the region meant US investors were unlikely to underwrite deals in 2024, while poor performance of the office market at home made them likely to shun that sector in particular.

“US investors are very sceptical to invest into the office market [in Asia],” he said.


Increased allocations in China came despite limited participation of overseas investors, the JLL report noted.

Henry Chin

China was investors’ favourite destination over the period, a stark contrast from a year ago when it was the fourth-most favoured destination behind Australia, South Korea and Japan.

Meanwhile, flows into Hong Kong were up 15% year-on-year to $0.8 billion.

Chin pointed to attractive pricing and good prospects on the mainland. “We like mainland China – as Shanghai grade A office prices have contracted by 20% since 2018. We are expecting to see rents to bottom out and prices to stabilise in 2024”.    

The JLL report noted strong demand in China for industrial and logistics assets from both domestic investors and corporate occupiers, with those equipped for R&D the primary recipients of capital.

In Hong Kong, most transactions consisted of small lumpsum deployments involving strata-title assets for owner occupation.


Pamela Ambler, head of investor intelligence, Asia Pacific, JLL, speaking on publication of the report, noted a mixed picture for the coming months. 

Pamela Ambler

“As we approach the end of 2023, investors will weigh the elevated cost of capital against an uncertain macroeconomic environment. With the Fed’s upcoming decision on adjusting interest rates, we can also expect investment activity to pick up as the cost of debt eases,” she said.

“In the region, interest rate hike cycles are nearing their end – the Reserve Bank of New Zealand and Bank of Korea are likely to conclude their monetary tightening whilst the Reserve Bank of Australia may have more work to do.

"Thus, regional fixed rates are now closely resembling floating rates, apart from Japan as it plans to move towards policy normalisation," she added.


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