Knight Frank Asia-Pacific's latest Q3 2024 capital markets highlights show significant growth in cross-border investment in the region, reaching US$36.3 billion, and marking a 15.7% year-on-year increase. 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. Q4 2024 is expected to contribute US$9 to US$10 billion to this total.

On a global scale, cross-border transactions have shown a near recovery, with year-to-Q3 volumes at US$95.1 billion, registering a marginal 1.3% decline from the same period in 2023. This further accentuates Asia-Pacific's outperformance in the international market and renewed investor interest in the region.

Neil Brookes, global head of capital markets, Knight Frank says, "The global real estate market is showing remarkable resilience, with cross-border transactions nearly regaining their momentum from a year ago. The September rate cut has been a catalyst, reducing borrowing costs and making debt-financed acquisitions more attractive. 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."

Data centres lead as cross-border investments diversify across sectors

Sector performance highlights data centres’ dominance, capturing 46% of investments, as investors seek to capitalise on the region’s advancements in AI and increasing reliance on cloud computing and data storage.

A prime example of this trend is Blackstone and Canada Pension Plan Investment Board's landmark acquisition of AirTrunk, a leading data centre platform, in a deal worth approximately US$16 billion.

In Q3 2024, excluding the AirTrunk acquisition, the data centre sector attracted US$544 million in investments, marking a 36.3% year-on-year increase. The sector's growth is further evidenced by consistent quarterly investments of at least US$400 million over the past year, signalling sustained investor confidence in this rapidly evolving asset class.

Christine Li, head of research, Asia-Pacific, Knight Frank, says, “The growth in data centre investments reflects a fundamental shift in real estate priorities. 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."

Excluding the significant data centre transaction, traditional asset classes such as office and industrial properties continued to dominate cross-border acquisitions in Q3 2024. 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 Lendlease's US$1.2 billion purchase of a seven-property Singapore portfolio.

Neil adds, “The presence of such substantial deals and those in the pipeline indicate that the gap between valuations and buyer sentiments has narrowed even further. As liquidity improves further, we are likely to see a wider spectrum of deals taking place in 2025."

For further information, please contact Neil Brookes, Global Head of Capital Markets, Knight Frank and Christine Li, Head of Research, Asia-Pacific, Knight Frank as the details below.