This article is from the Australian Property Journal archive
CROSS-border real estate investment in the Asia-Pacific has jumped by nearly 16% over the past year, as interest rate cuts see optimism creeping back into the market – which means more deal-making on the way, and data centres are leading the charge.
Knight Frank research tallied US$36.3 billion so far this year, marking a 15.7% year-on-year increase, and cross-border investment is projected to grow 50% year-on-year by the end of 2024 to reach around US$48 billion – its highest in two years.
The December quarter is expected to contribute US$9 billion to US$10 billion to this total.
It follows a post-pandemic freeze in transactions as values dropped in the fact of high interest rates and structural headwinds, and with buyers and sellers a long way apart on pricing.
On a global scale, cross-border transactions have shown a near recovery. They tallied US$95.1 billion, a marginal 1.3% decline from the same period in 2023, accentuating Asia-Pacific’s outperformance in the international market and renewed investor interest in the region.
“The September rate cut has been a catalyst, reducing borrowing costs and making debt-financed acquisitions more attractive,” said Neil Brookes, global head of capital markets, Knight Frank.
“This, coupled with the stabilisation of asset prices, signals a positive shift in market dynamics.
“Asia-Pacific is feeling the ripple effects of this global optimism, and we are seeing increased investor confidence across our markets. As we move towards the end of 2024, we anticipate this forward momentum to accelerate, potentially outpacing global recovery rates.”
The region’s advancements in artificial intelligence, cloud computing and data storage drove the data centres sector to capture a whopping 46% of investments. The key deal was Blackstone and Canada Pension Plan Investment Board’s landmark acquisition of data centre platform AirTrunk, in a deal worth around US$16 billion.
The data centre sector attracted US$544 million in investments in the September quarter, marking a 36.3% year-on-year increase, there has been quarterly investments of at least US$400 million over the past year.
“The growth in data centre investments reflects a fundamental shift in real estate priorities,” said Christine Li, head of research, Asia-Pacific, Knight Frank.
“As generative AI and digital technologies continue to reshape our world, we see unprecedented demand for these specialised assets. The AirTrunk acquisition is just the tip of the iceberg. Investors recognise the long-term potential of data centres, driven by the exponential growth in data consumption and processing needs.
“This trend will likely persist as businesses and consumers increasingly rely on digital infrastructure, making data centres a cornerstone of real estate portfolios.”
ASX-listed data centre operator NextDC last month launched $750 million capital raising to further its expansion into Asia, including obtaining new data centre development sites.
CBRE’s annual Global Data Centre Investor Survey recently found that 97% of investors are planning to increase their investment into data centres in 2024, with 92% allocating more than US$100 million into data centres and 44% planning to allocate more than US$500 million into the sector.
Elsewhere in the market, office and industrial properties continued to dominate cross-border acquisitions. The office sector captured 35% of the market and attracted US$7.3 billion in capital, a 16.7% year-over-year increase.
Several high-profile transactions included PAG’s US$572 million acquisition of Mapletree Anson in Singapore, CapitaLand Investment and Kookmin Bank’s US$320 million purchase of Golden Tower in Seoul, and Deka Immobilien’s US$258 million investment in 333 George Street.
Industrial assets emerged as the second-strongest performer, securing 32% of the total share with US$6.5 billion in cross-border investments. Despite a 12.3% year-over-year decline, the sector saw significant portfolio transactions, including Hankyu Hanshin Properties and KWAP’s US$2.2 billion acquisition of an 11-property Australian portfolio, and Warburg Pincus and ASX-listed Lendlease’s US$1.2 billion purchase of a seven-property Singapore portfolio.
Cross-border investment into Australia has seen a number of major plays by Japanese investors, as well as Hankyu Hanshin – which Australian Property Journal reported is also making a play for a 2,000-apartment project at Melrose Park.
Lendlease has just partnered with Nippon Steel Kowa Real Estate for a $500 million build-to-rent apartment project in Melbourne’s Docklands, while Australia’s biggest home builder Metricon will become majority-owned by Tokyo Stock Exchange-listed Sumitomo Forestry, Japan’s largest diversified property developer, Mitsui Fudosan, took a majority stake in Mirvac’s $2 billion 55 Pitt Street office development in Sydney, and ESR’s local arm recently partnered with Mitsubishi Estate Asia to develop a $175 million industrial estate in Melbourne’s south-east.
Japanese investors were the most active source of offshore capital in Australia throughout 2023, putting $2 billion towards assets down under.
