Changing dynamics of Asian Commercial Property Investment

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IPD has announced that the local currency return for Asian commercial property investment was 8.4% in 2011, according to the IPD Pan Asia Return Research (PARR).

This performance is modestly better than in 2010 when the total return was 6.6%.

The Pan Asia 2011 return combines an income return of 5.6% with a capital growth of 2.7%. The income return is unchanged on 2010, but the capital return is up from 1.0%. 

The research, sponsored by Invesco Real Estate and J P Morgan, covers China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan and Thailand. This is IPD’s largest sample of Asia investment property to date and includes assets worth US $244.3 billion, nearly 20% more than in last year’s research. 

Dr Kevin Swaddle, Managing Director of IPD Asia said: “While most of Asia’s property investment markets improved a little last year, the Chinese markets soared with a return of 18.0%. Still, there was a wide range of returns included in the 2011 Pan Asia composite, from a high of 22.3% for Hong Kong to 3.4% for Japan. The continuing poor performance in Japanese property, the largest segment of the index, will be of little surprise to investors. 

“Some markets are up on last year, and a few down. But the key finding is that the top three markets are all influenced by China: Hong Kong, the Mainland itself and Taiwan.”

Thomas Au, Director, Head of Asia Real Estate Research at Invesco Real Estate Asia said: "The solid performance reflects strong fundamentals of the APAC market. The wide range of returns across different markets and sectors suggest that there are many different opportunities available for investors in this region."

Global comparisons

Asian returns remain ahead of those in Europe, where debt contagion fears have seriously impacted on values. 

“Investors are finding themselves at a crossroads,” continued Swaddle. 

“Values in Asia, and their continuing growth, are in doubt, but the previously stable income holds of Europe offer little better risk aversion potential. The US is still seeing strong double digit returns, but this is not expected to continue next year. In the current global market it is becoming more and more difficult to find safe havens.”

Transparency

The research, now in its third year, greatly increases transparency, encourages better governance and supports improvements in best practice across local property markets throughout Asia, enabling better investment decisions.

Au added: “We are pleased with the progress that IPD’s PARR has made and its contribution to improving transparency of the APAC market.”

David Chen, Managing Director, Head of Global Real Assets – Asia at J.P. Morgan Asset Management said: “As we continue to expand our business in Asia, we’re very supportive of the work IPD is doing to bring greater transparency and performance measurement to the property markets in the region.” 

Long-term performance

Over the last five years, the weighted local currency Pan Asia return was 6.2% per year, which combines an income return of 5.3% per year and a capital return of 0.9% per year. Hong Kong was the best of the seven countries which have a full five-year history, with an annualized return of 16.0% per year, and Japan had the lowest return, at just 1.6% per year. Hong Kong and Japan also occupy the top and bottom positions over two, three and four years annualized.

Retail property had an annualized return of 8.5% over the last five years. This was significantly ahead of the five-year return from offices, which achieved 5.9% per year. Offices in turn beat industrial/logistics property, at 5.3% per year, but with much more volatile returns from year to year. Hong Kong retail was the best individual market over the last five years, with a total return of 16.9% per year. 

Chen said: "The data illustrates why we believe the property markets offer attractive opportunities to harness the growth in Asia."

This research will be announced at a series of events across Asia and Europe starting today in Tokyo, and continuing in:

• Seoul, Korea – Monday June 18

• London, UK – Tuesday June 19

• Shanghai, China – Wednesday June 20 (in conjunction with CBRE)

• Hong Kong, China – Friday June 22 (in conjunction with CBRE)

• Kuala Lumpur, Malaysia – to be announced (in association with APRIA)

• Singapore – Tuesday June 26 (in association with APRIA)

 

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