Although the overall APAC region saw a downturn in cross-border investment activity from a year before, the Singapore, Japan and South Korea markets gave a different story, according to Knight Frank.

Cross-border investment in Singapore’s real estate market rose 22.8 per cent above its 10-year average, although the volume of investment in Q1 2024 slumped 44.5 per cent on a year ago, according to Knight Frank in a study of Asia-Pacific property market trends.

The Asian city-state received the highest share (45.6 per cent) of overseas capital among APAC markets during the quarter, the global property consultancy said. 

South Korea saw a "powerful comeback," underscored by office and hotel acquisitions, the firm said. Japan recorded the highest investment volume in APAC, bolstered by office and industrial transactions.

A hotspot for such activity – hotels, for example â€“ is the “MICE” sector (meetings, incentives, conventions, and exhibitions), Knight Frank said. However, across APAC in general, asset allocation to hotels dipped in relative terms from a year ago. 

The purchase of Citadines Mount Sophia Singapore and Hotel G Singapore, both being rebranded, were cited by Knight Frank as examples of the kind of investment going on in Singapore. For example, earlier this year Weave Living formed a joint venture with a BlackRock fund to buy Citadines Mount Sophia for S$148 million ($109.6 million). The property is a 154-unit property near the city-state’s Bugis area. It was bought from CapitaLand Ascott Trust.

“Our research shows that in the face of a 29 per cent quarter-on-quarter decline in cross-border activities across Asia-Pacific, Singapore bucked this trend,” Christine Li, head of research, Asia-Pacific at Knight Frank said. â€śThe hospitality sector attracted significant interest from institutional investors with its optimistic outlook and improving operational metrics."

Turning to the MICE factor, Li noted that government initiatives such as the China-Singapore 30-Day Mutual Visa Exemption were notable boosts for increasing tourism demand.

Rising interest rates – with Japan finally joining the trend – alongside geopolitical and macro-economic uncertainties, have taken some heat out of APAC’s real estate investment markets in general. The offices sector continues to feel the impact of pandemic lockdowns and the move to remote and hybrid working practices.

Softening volumes

Data for the latest quarter shows that for all the oft-mentioned woes of the offices sector post-pandemic, offices as a share of total real estate allocations rose to 39 per cent in 2024 from 32 per cent in the first quarter of 2023. Retail rose to 24 per cent from 21 per cent, and industrial shrank to 18 per cent from 27 per cent. "Living sectors" fell to 6 per cent from 8 per cent; hotels dipped from 8 per cent from 9 per cent, and the remainining "niche" sector rose to 5 per cent from 3 per cent. 

Knight Frank said that US institutional investors were particularly focused on office opportunities, with the biggest deal being the Vision Crest acquisition, at $348 million. Singapore investors were more interested in hotel assets, however, such as the $318 million Conrad Seoul Hotel in South Korea.

South Korea, Japan
Although the Asia-Pacific trend is one of softer volumes of cross-border investment, South Korea and Japan have attracted renewed commercial investment interest, particularly in the office sector.

In South Korea, investment volume reached $5.8 billion, surging 180 per cent year-on-year. Office deals dominated the market, at 64.7 per cent of the total investment volume – with a 69.6 per cent quarter-on-quarter rise and a sixfold year-on-year increase.

Hospitality assets in South Korea attracted $850 million in investment, up 234.7 per cent from Q4 2023 and a 44-fold year-on-year expansion, primarily funded by institutional investors. 

In Japan, despite an overall contraction in real estate investment volume, with a 28.3 per cent year-on-year decline, the country saw renewed investor interest in office and industrial assets.

Office transactions in Japan accounted for almost half of the total volume, which doubled from the previous quarter but dropped 31.6 per cent year-on-year. Investors are motivated by the positive momentum anticipated for the office sector, underpinned by consistent occupier demand, Knight Frank concluded.