It is official: things could look much worse. At least, this is what the majority of the industry experts were predicting based on the initial havoc wrecked by the pandemic in late 2019 and early 2020, especially in the Asia Pacific. Investor sentiment, unfavorable government restrictions, and generally hostile macroeconomic situation were just some of the factors destined to spell doom to the capital markets across the region. Make no mistake, the numbers are low, much lower than the record-high number of assets changing hands back in 2019. Yet, we expected much worse results.
In 2020, transaction activity in APAC took a hit, achieving a volume of approximately US $8.6 billion worth of hospitality assets, indicating a 41.8% decline year on year. The picture is similar when looking at the 2Q 2020 and 1Q 2021 dynamics, with transaction activity continuing to slow down. Nevertheless, there are also signs to stay optimistic – at least for certain markets – as the growing interest is registered in Australia & New Zealand, China, Japan, South Korea, Taiwan, and certain markets in the South-East Asia regions.
As such, despite a relatively low number of completed transactions, a significant volume for hospitality assets is observed in the last four quarters in China, Taiwan, and Thailand. To be more specific, triple the amount of money was invested in this sector in Taiwan (US $0.36 billion to US $1.1 billion), and 13 hotels have changed hands during the period, being traded by both domestic and Chinese owners.
When it comes to the major players, most of the transaction volume was supplied by the local investments, representing approximately US $2.3 billion. Even though the coronavirus pandemic has certainly impacted the climate in a negative manner, foreign investors are starting to eye properties abroad. In terms of the transaction activity by the number of transactions, Australia-based Iris Capital tops the list with 17 deals in Australia while Australia-based Salter Brothers and Singapore-based GIC recorded eight in the same market. This is followed by Singapore-based CDL which recorded six in China, Malaysia, and Singapore, Japan-based Daiwa Securities recorded five in Japan, and US-based Blackstone recorded four in China and India. In total, in 2020, transaction activity from the top ten investors in the Asia Pacific accounted for approximately US $3.35 billion or 41.4% of total transaction volume.
Overall, the investment interest is anticipated to pick up in late 2021 and 2022 as capital holders seize opportunities to tap on the gradual recovery of the tourism sector, albeit with a cautious approach. This will vary greatly depending on the local recovery rates, different government policies, and vaccination success rates. Nevertheless, markets seem to prove once and again to be quite resilient to multiple and scalable shocks, which means that there is still space for optimism looking in the medium- and long-term perspectives.