Cross-Border Transactions Regain Momentum in APAC

Cross-border investment in the Asia-Pacific (APAC) region is projected to grow 50% year-on-year by the end of 2024 to reach approximately $48 billion, its highest in two years, according to Knight Frank, the global real estate consultancy firm.

In its latest report entitled “Asia-Pacific Capital Markets Insights Q3 2024,” Knight Frank said that the total transactional volume across the world stood at $95.1 billion in the first nine months of this year and this trail by a mere 1.3% when compared to the same period in 2023.

Among all sectors, it was the data centres that led these cross-border investments capturing 46% of investments. This was followed by office sector, which attracted $7.3 billion in capital and industrial assets emerge as the third strongest performing asset class, securing $6.5billion, the report said.

This rapid rebound is attributable, in part, to the notable surge in activity witnessed in September. The prospect of an impending rate cut – which came to fruition on 18 September – appears to have been a key driving force behind this upswing.

“Lower interest rates will invariably result in reduced borrowing costs, making debt-financed acquisitions an increasingly viable and attractive option for prospective investors. The timely implementation of this new monetary policy aligns with the culmination of asset repricing adjustments,” the report noted.

Price declines have exhibited signs of moderation, and in some regions, have effectively plateaued. The positive trends emerging throughout the third quarter indicate that the market has successfully weathered yet another storm – a testament to its resilience amidst recent years’ challenges and uncertainties.

Data Centres Lead

The ripple effects of this optimism can be felt throughout the Asia-Pacific region, as evidenced by the impressive year-to-Q3 cross-border figures totalling $36.3 billion. This notable achievement reflects an encouraging 15.7% increase when compared to 2023’s total volume, highlighting returning interests back into the region.

The significant investment volume can be partly attributed to the acquisition of AirTrunk, an Asia-Pacific data centre firm, by Blackstone and Canada Pension Plan Investment Board (CPPIB). Valued at approximately $16 billion, this deal exemplifies the growing appetite for data centre assets, which have consistently attracted a minimum of $400 million in quarterly investments over the past 12 months.

Excluding the AirTrunk acquisition, Q3 of 2024 alone saw $544 million invested in data centres, marking a notable 36.3% increase compared to the same period a year ago. As of September 2024, data centre investments accounted for a substantial 46% of total market activity, underscoring the sector’s rising prominence in response to the AI boom and the increasing reliance on digital infrastructure.

Focus on Traditional Asset Classes

Notwithstanding the large entity deal, cross-border acquisitions were still largely focused on the traditional asset classes such as office and industrial in the third quarter.

The office sector maintained a strong foothold in the market, capturing 35% of the total share and attracting $7.3 billion in cross-border capital year-to Q3. This marks a robust 16.7% increase from the corresponding period last year, demonstrating a healthy and sustained demand within the sector.

Notable transactions during this period include the acquisition of Mapletree Anson in Singapore by PAG for approximately $572 million, the purchase of Golden Tower in Seoul by CapitaLand Investment and Kookmin Bank at nearly $320 million, and the $258 million investment in 333 George Street by Deka Immobilien.

The industrial sector emerged as the second-strongest performer, capturing 32% of the total share with $6.5 billion in cross-border investments during the first three quarters of 2024.

Despite a 12.3% decline compared to the same period in 2023, the sector’s volume was bolstered by several prominent portfolio transactions.

Notable deals include the $2.2 billion acquisition of an 11-property portfolio in Australia by Hankyu Hanshin Properties and Kumpulan Wang Persaraan (KWAP), and the $1.2 billion sale of a 7-property portfolio in Singapore to US fund manager Warburg Pincus and Australia’s Lendlease, the report said.