Europe’s property market draws Asian investors fleeing China

PRIVATE equity players in Europe are upbeat on the region’s property market, especially the residential and industrial sectors that are boosted by rising interest from Asian investors who are moving away from China.

China’s lacklustre economic growth and persistent property slump have led Asian investors to dial back their exposure there. While European real estate has always appealed to Asian investors, they are increasingly focusing on certain sectors.

“There’s always been Asian interest, and real estate has probably led the alt (alternative) allocation pre-pandemic,” Stewart Bennett, global head of alternatives at Columbia Threadneedle Investments, told The Business Times last week.

Back then, Asian capital was chasing mainly office assets, with some of those being bought characterised as “trophy assets”, he said.

But now, growing sophistication has seen them focus on opportunities in a number of sectors. Columbia Threadneedle Investments counts US$645 billion in assets under management (AUM), including US$29.3 billion in real estate.

Within the broader residential sector in Europe, participants point to students’ accommodation in the UK as a popular play for investors.

The UK Parliament said in a September 2024 report there were nearly 759,000 overseas students studying in the country’s universities, with the most coming from India, China and Nigeria.

Zooming in on top universities

Even a 5 per cent drop in the number of student visas in the UK last year is not a concern.

“Our approach has been that we actually only take exposure to the very top universities... the top 10 in the UK” that are more immune to the risk of falling student numbers, said Daniel McHugh, chief investment officer at Aviva Investors, which has £238 billion (S$408.5 billion) in AUM.

According to a Knight Frank survey of 4,500 students in the UK through different points of the 2024 academic cycle, average rents for those living in purpose-built student accommodation rose 7.6 per cent. That compares with a rise of 2.8 per cent for maintenance loans for students.

Singapore-based players are already in the sector. Mapletree Investments last year bought 8,192 student housing beds across 19 cities in the UK and Germany from Cuscaden Peak Investments, in a deal worth £1 billion. Mapletree is part of a consortium that owns the parent of Cuscaden Peak Investments.

South Korean investors such as pension funds have also been stepping up their exposure to European real estate, said McHugh.

ABL Life Insurance is one of the South Korean investors keen on European property, particularly the UK residential sector.

Supply crunch in UK housing makes it “very appealing”

“UK is very, very appealing these days... especially in residential where we are focused,” Jiroo Eoh, head of department, alternative investment department at ABL, said at last week’s Private Equity Real Estate Asia Summit 2025 in Singapore.

A supply crunch and a recovery from then-prime minister Liz Truss’ chaotic mini-Budget in late 2022 helped boost UK house prices last year. Ninety-one per cent of households in England and Wales sold their home for a profit in 2024, with nearly a third making six-figure gains, according to a January report from broker Hamptons International. That is even as UK home sellers made the lowest profit in more than a decade last year, as high interest rates dented demand.

Nonetheless, market observers are optimistic of price gains this year, fuelled by a long-term slump in home construction. A rush to complete transactions before a property tax increase comes into effect in April could also help to boost prices.

Apart from residential, Asian investors are also interested in Europe’s industrial sector, given the rise in e-commerce.

Apart from that, the “rebalancing of supply chains, moving away from a global position to more localised ones, near-shoring and friend-shoring” mean that many end-users prefer to speed up the journey from when goods are being made to being placed on shelves, said Joseph Vullo, head of European real estate at Columbia Threadneedle Investments. “So we think logistics will carry on offering growth in the right locations,” he added.

The favourable call on the European logistics sector appears to be borne out by the number of deals involving Asian investors.

In January, AustralianSuper, the country’s biggest retirement fund with more than A$365 billion (S$306.5 billion) in AUM, said it bought a 50 per cent stake in Oxford Properties Group’s A$1.4 billion European industrial and logistics portfolio.

In the same month, Mapletree Investments acquired its first logistics property in the UK. This, together with 10 warehouses in Spain, cost the Singapore company about 315.1 million euros (S$450.9 million).