S'pore again leads Asia in real estate investment

Singapore

SINGAPORE investors led the region in real estate investments in 2014 with US$11.9 billion worth of properties acquired across the world, a 26.6 per cent increase from 2013, said CBRE Research.

This was the second year in a row the Republic came out tops as a source of outbound capital, followed by China and Hong Kong. All three markets showed an increase in cross-border investment. In 2014, China investors spent US$10.1 billion on real estate, followed by Hong Kong (US$6.3 billion), Malaysia (US$2.1 billion) and Taiwan (US$1.6 billion).

The report on Monday added that Asia's outbound real estate investment hit a record US$40 billion in 2014, an increase of 23 per cent year on year.

Ada Choi, senior director for CBRE Research Asia, noted that Singaporean investors had looked offshore due to compressed yields in their home market and a shortage of investable assets, while Chinese outbound growth was largely driven by the emergence of new sources of real estate capital, particularly insurers, as they sought to increase their allocation to real estate under more relaxed rules.

The deployment of capital into real estate accelerated as new investor types emerged over the year, in particular insurance groups from China and Taiwan and Chinese property companies, said the report.

"We also saw Chinese property developers increasingly active in international markets. Alongside more direct investment, more experienced Asian institutional investors from places such as South Korea and Japan are increasingly gaining exposure via indirect funds and club deals. Established sources of capital such as these will continue to grow, but the emergence of sources of new capital such as the Chinese and Taiwanese insurance companies will make a significant mark on global real estate markets in the coming years," Ms Choi said.

Investment strategies have also begun to evolve as investors look beyond traditional gateway markets. In 2013, 60 per cent of outbound investment focused on five global investment destinations, but fell to 39 per cent in 2014. Notable beneficiaries of this 2014 trend included Paris in Continental Europe and Los Angeles, San Francisco and Washington in the United States.

The report said Asian cross-border real estate investors have also started diversifying in terms of asset classes; investing more in hotels and industrial - though office continued to dominate. It added that Europe, the Middle East and Africa (EMEA) continued to receive the largest share of Asian investment - US$13.7 billion of the total - but remained flat in 2013.

Other regions that saw substantial increases in Asian investments were the Americas (up 20 per cent year on year), Pacific (33 per cent year on year) and Asia intra-regionally (58 per cent year on year). In Asia, Japan was the leading target destination, followed by China, said the report.

Marc Giuffrida, executive director of Global Capital Markets, Asia, said: "Last year was an important year for cross-border real estate investing. We saw the deployment of capital accelerate as a convergence of structural and cyclical factors encouraged pockets of new capital to enter the market. This is a key trend we expect will continue into 2015."

He added that while the acquisition of trophy assets continued to attract headlines, and New York and London remain top destinations for investment, there has been a shift into secondary gateway cities such as Paris and Los Angeles as well as regional centres of the United Kingdom.

"This trend can be best seen in the falling concentration of the top five global destinations among the total pool of Asian cross-border investment," said Mr Giuffrida, who added that there is a shift in the types of assets that Asian investors are seeking. While office continues to be the preferred asset class, particularly for new investors, there was a significant uptick in activity in hotels and industrial assets, he said.