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Singapore investors put US$5.7b in offshore commercial property in H1: CBRE

INVESTORS from Singapore spent an eye-catching US$5.7 billion in offshore commercial real estate investments in the first half this year, ranking it as the second-largest source of Asian outbound capital just after South Korea, a latest report by real estate agency CBRE shows. 

For the first six months this year, South Korean investors chalked up US$6.8 billion worth of overseas transactions.

Year on year, outbound capital flows from Singapore fell 37 per cent in H1 2019. It also plunged more than 50 per cent from H2 2018, which could be seasonal as Singapore-based investors tend to be more active in the second half of the year – a trend observed since 2013, CBRE explained. 

Hugh Menck, executive director of capital markets at CBRE Singapore, said: "While investors from Singapore have been active in overseas investments in 2017 and 2018, the looming global economic uncertainties may have moderated their pace in general. Nonetheless, Singapore-based buyers became more active within Asia, a region that they are more familiar with, accounting for 43 per cent of transaction volume in the region in the first half of the year."

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"In particular, Singapore-based investors have turned more active in China in the past 12 months to leverage weaker competition from domestic investors. A number of Singapore developers have made acquisitions in China's Tier 1 cities. Given the sheer market size, China remains a major market for investors who are focused on long-term growth," Mr Menck added.

The report also noted that there is continued strong demand from Singapore-based buyers seeking opportunities in mature economies, particularly cities in the US and Western Europe, with a select group of buyers looking beyond the European gateway cities to Ireland and Poland. 

"For Singapore-based investors, acquisition strategies focused primarily on structural opportunities such as logistics properties, as well as defensive assets such as offices. There are also buyers who are adding multi-family assets to their portfolios," CBRE said. 

An emerging trend among Singapore-based investors is the pursuit of higher yields and alternative investments, including student accommodation and data centres.

Taken together, Asian outbound commercial real estate investment amounted to US$19 billion for the first half of the year. This translates to a 25 per cent decline year on year, weighed down by the rebalancing of portfolios by mainland Chinese investors, and global economic uncertainties, the report highlighted. 

Despite a moderation in global capital market flows, the momentum in Asian outbound capital flows is being spurred by new sources of capital looking for diversification, a low interest-rate environment, historically low yields, and increasing popularity in new destinations, CBRE said. 

Henry Chin, head of research of APAC/EMEA at CBRE also pointed out that Asian capital flows are not homogeneous. "While there are overarching factors like geopolitical uncertainties and low interest rates which will affect the region as a whole, investors from each market possess a different set of motivations and have different options in capital deployment.

"For instance, low domestic yields and positive hedging environment were identified as key motivators for Korean investors' purchasing activity, while Singapore-based investors are largely motivated by yields and are more willing to move out on the risk curve to explore alternative property investment options," Dr Chin said. 

CBRE is of the view that Asian investors can still capture alpha returns through a defensive, blended portfolio which combines both direct and indirect investments in core properties.

"Participation in funds will be worthwhile for investors who are interested in increasing their exposure to commercial real estate, but perhaps, lack the operational expertise," Dr Chin concluded.