SOUTHEAST Asia is a bright spot for data centers, according to data and analysis by global real estate consulting firm JLL.
JLL said investment into Southeast Asia data centers made up 52 percent of Asia Pacific investment volume.
Southeast Asian countries become prized data centre investment locations due to their relatively lower cost of land, labor and electricity, translating to operational efficiency and competitiveness for data centre providers.
JLL data showed commercial real estate investment in Asia Pacific rose 2 percent year-on-year (YoY) in the second quarter 2024 to $27.3 billion, marking the third consecutive quarter of growth for the region.
JLL said first half investment volumes totalled $57.5 billion, a 7 percent increase from the same period a year ago.
“With expectations that the US Federal Reserve will lower interest rates in September growing, we expect an easing of borrowing costs to follow for some markets in the region,” said Pamela Ambler, head of Investor Intelligence, Asia Pacific, JLL. “Coupled with the buzz in Southeast Asia’s data center sector and a more conducive monetary policy, we are feeling more bullish on the prospects for commercial real estate investment in the region.”JLL said the office, hotel, and retails lead the charge in real estate investments in Asia-Pacific.
Office remained the most active sector, with Asia Pacific office volumes reaching $10.7 billion in the second quarter.
Growth led by offices was supported by retail and hotels, which continued to record volume growth from a year ago. Asia Pacific retail volumes rose 12 percent YoY to $4.6 billion and hotel volumes grew 19 percent YoY to $5.7 billion for the first half of 2024.
“The cost of borrowing remains continues to weigh on sentiment across Asia Pacific.
Despite this, the region’s office sector has seen renewed transactional activity and momentum across larger deals has improved,” said Stuart Crow, chief executive officer, Asia Pacific Capital Markets, JLL. “Coupled with strong prime rental growth in many markets and anticipated rate cuts, return expectations are set to improve, further boosting investor sentiment,” Crow said.
Cross-border investment: Cross-border investment volumes in Asia Pacific registered $7 billion in the first half of 2024.
Cross-border capital favored hotel investment strongly. In the second quarter, China and Hong Kong became predominantly domestic markets, as foreign investors adopt a wait and see approach.
Singapore ($1.9 billion) and Australia ($5.4 billion) both recorded YoY growth in investment volumes, up 31 percent and 73 percent respectively. In Singapore, strata sales dominated office transactions, with occupiers and family offices actively seeking investment opportunities.
In Australia, capital allocation towards office and industrial assets rebounded strongly following several large institutional sales, with industrial volume reaching its highest quarterly level since the fourth quarter of 2021, and the office sector at its highest level since the third quarter of 2022.
