Data centres push Asia’s cross-border property investment towards 2-year high
Anticipated growth of 50 per cent will drive 2024 cross-border investments to about US$48 billion, according to Knight Frank
The Asia-Pacific region is witnessing a surge in cross-border real estate investments, which are set to soar by 50 per cent year on year in 2024, led by growth in data centres, according to Knight Frank.
The anticipated growth will push investments to about US$48 billion, the highest level in two years, the property consultancy said.
Cross-border investment in Asia-Pacific jumped 15.7 per cent year on year to US$36.3 billion in the first nine months, outperforming the international market. Globally, cross-border transactions declined 1.3 per cent to US$95.1 billion in the same period, compared with 2023, according to the firm.
“The September rate cut has been a catalyst, reducing borrowing costs and making debt-financed acquisitions more attractive,” said Neil Brookes, global head of capital markets at Knight Frank.
Last month, the US Federal Reserve cut interest rates by half a percentage point, the first reduction in four years, following a slow but steady decline in America’s inflation rate.
This, coupled with stabilisation in asset prices, signals a positive shift in market dynamics, Brookes said.
“Asia-Pacific is feeling the ripple effects of this global optimism, and we are seeing increased investor confidence across our markets,” he said. “As we move towards the end of 2024, we anticipate this forward momentum to accelerate, potentially outpacing global recovery rates.”
Investments in data centres drove growth in the third quarter, contributing 46 per cent of total cross-border investments as investors “seek to capitalise on the region’s advancements in AI and increasing reliance on cloud computing and data storage”, Knight Frank said.
In September, Blackstone and Canada Pension Plan Investment Board acquired Asia-Pacific data centre firm AirTrunk for A$24 billion (US$16 billion) – the largest-ever deal of its kind. Excluding that deal, the data centre sector attracted US$544 million in investments, marking 36.3 per cent year-on-year growth, according to Knight Frank.
“The AirTrunk acquisition is just the tip of the iceberg,” said Christine Li, head of research for Asia-Pacific at Knight Frank. “Investors recognise the long-term potential of data centres, driven by the exponential growth in data consumption and processing needs.”
The trend is likely to persist as businesses and consumers “increasingly rely on digital infrastructure, making data centres a cornerstone of real estate portfolios”.
Traditional asset classes such as offices and industrial properties dominated cross-border acquisitions in the first nine months.
The office segment contributed 35 per cent of the investment, attracting US$7.3 billion in capital for a 16.7 per cent year-on-year increase.
Industrial properties, including warehouses and industrial parks, ranked as the third-strongest segment, contributing 32 per cent of total cross-border investments at US$6.5 billion, Knight Frank data showed. The sector saw mega deals despite a 121.3 per cent year-on-year decline, including a US$2.2 billion acquisition of an 11-property asset in Australia and the sale of a seven-property asset in Singapore.
Such deals, along with others on the way, indicate that the gap between valuations and buyer sentiments has narrowed, Brookes said. “As liquidity improves further, we are likely to see a wider spectrum of deals taking place in 2025,” he added.
