The combination of softening business activities in Asia and turmoil in the global financial markets continues to limit commercial real estate investment activity in the Asia Pacific region. Investors remain cautious as property values and rents decline. Cross-border investment especially has been subdued by a lack of debt financing and heightened risk aversion on the part of institutional investors.

During April 2009, Real Capital Analytics tracked deal volume in the Asia Pacific region (based on deals valued at US$10 million or more) of $5.9 billion, which represents a 57% drop from the April 2008 total. On a year-to-date basis through April 2009, investors completed transactions totaling $25.6 billion, a decline of approximately 65% from the 2008 four-month total of $75.5 billion. Markets in China attracted the most capital during April ($3.4 billion), followed by Japan ($1.6 billion). However, during the first four months of 2009 investment activity in China experienced a 57% drop from the comparable 2008 figure. Japan’s decline was even steeper at 65%.

Investors consider Tokyo relatively attractive, especially the office sector, and the city registered the most investment activity year-to-date, with a total of approximately $6.4 billion. During, the past 12 months, Tokyo has been the most active market globally as transactions have totaled more than $20 billion. It was announced recently that Tokyo’s Inner Central District has supplanted London’s West End as the world’s most expensive office market, according to research by CB Richard Ellis.

Other markets that have recorded the highest transaction sums during the year’s first four months include Beijing ($1.7 billion), Shanghai ($1.5 billion), Seoul ($1.3 billion) and Osaka ($1.2 billion). Investors have focused on development projects; during the past 12 months, development sites have represented 47% of total transaction volume.