The property investment market in Asia enjoyed a stronger second quarter following a subdued start to the year, with direct real estate investment volume rising 41 per cent from the first quarter.
The improved investment turnover was due partly to debt-funded investors compromising at current price levels and liquidating assets to service near-term debt obligations, according to CB Richard Ellis’ Asia Investment MarketView report for the first half of 2009.
However, transaction volumes remained thin in the first half compared to the corresponding period in 2008, falling by 58 per cent on-year to about US$12.4 billion.
Investor sentiment in the region generally turned more positive in the second quarter. Hong Kong experienced the largest quarterly rebound in transaction volume, up 302 per cent in the second quarter, followed by Singapore and Taiwan at 297 per cent and 151 per cent respectively.
In Singapore, total investment sales during the second quarter were boosted by the sale of three en-bloc office buildings. They represented 24.5 per cent of total investment sales and injected life into what was previously a quiet commercial investment market.
Meanwhile, the Asian office market showed signs of stabilising in the second quarter as clearer indications of economic recovery emerge.
However, CB Richard Ellis said companies remained focused on reducing costs and tightening their real estate expenditures. They continued to adopt a conservative approach towards real estate decisions, especially those that would lead to an increase in operating costs.
The top priority for office landlords in Asia was retaining existing tenants and attracting new ones. In many markets, they displayed a willingness to negotiate lease restructuring and offer more incentives to desirable tenants.
Overall, leasing markets were sluggish and office rents remained in a down cycle, the report said. Office rents in Asia fell 6.7 per cent in the second quarter, decelerating slightly from the 8.1 per cent drop in the previous quarter as most cities underwent a smaller rental decline.
Since the start of the sub-prime crisis, rents in leading cities – including Tokyo, Hong Kong and Singapore – and major commercial hubs like Delhi, Mumbai, Manila and Ho Chi Minh City have corrected by 30 to 47 per cent from their peaks.
In Singapore, prime rents have fallen 46.6 percent from the peak recorded in the third quarter of last year. Occupancy rates continue to face pressure from new supply, as some 7.98 million square feet of new office space comes into the pipeline between now and 2013.
However, CB Ellis expects the rate of rental decline to slow as the macro economic environment becomes somewhat calmer.
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