JLL expects the real estate markets in Asia-Pacific to deliver strong total returns in the next three years, driven by the huge influx of capital into the region. “We have some of the world’s largest investors looking to increase their allocation to real estate and direct real estate,” says Stuart Crow, JLL head of capital markets. “Many are increasing their allocation to Asia-Pacific and rebalancing their portfolios from fixed income and equities.”

Real-estate transaction volume in 2014 was more than US$120 billion; in 2015, it hit US$125 billion ($170 billion). JLL expects to see incremental increase in transaction volume across the region this year.

JLL sees opportunities to acquire high-quality real estate assets in cities in China and Japan. In Singapore, prime CBD offices are being sold, while in Hong Kong, commercial property owners are looking to exit at high capital values today. Investor interest is expected to pick up in India and South Korea, notes JLL.

Capital entering the real-estate sector in Asia is also originating from within the region as wealth grows.

More than 80% of transactions in Asia Pacific are carried out by Asian investors, says Crow. “Capital has accumulated within pension funds, insurance funds and sovereign funds, particularly in China,” he adds.

Despite a slowdown in its economy, China is still very much the main driver of growth in the region. And its property markets offer lots of opportunity. While many Chinese investors are securing real-estate assets outside the country, there is a significant amount of capital heading towards domestic commercial real estate, says JLL.

In the residential segment, investors are looking beyond the traditional property hotspots of London and New York as strong capital appreciation has squeezed yields. JLL considers cities such as Manchester, Boston and Chicago to be undervalued. Meanwhile, the traditional residential property hot spots are expected to see a challenging year ahead.

This article appeared in the City & Country, Issue 721 (March 28, 2016) of The Edge Singapore.