Asian Investors Favor Big Ticket Deals in London, New York, Hong Kong
According to the latest research from CBRE, global real estate continues to serve as an attractive asset class for investors, with Asian outbound investment into the sector posting significant year-on-year gains in the first half of 2017.
Approximately $45.2 billion of Asian outbound capital was directly invested into global property in the first half of 2017, representing a 98.4% rise year-on-year against $22.8 billion allocated in the first half of 2016.
Strength in Asian outbound investment was led largely by the preference of investors for big ticket deals in the global real estate sector. In the first half of 2017, over 74% of committed investments were deployed into transitions valued at $250 million and over, versus 56% in the corresponding period in 2016.
Geography-wise, Asian investors remain bullish on Europe, Middle East and Africa (EMEA) and the Americas, which drew $21.9 billion--driven largely by a single $13.2 billion from the logistics portfolio purchase--and $11.3 billion in capital, respectively. The top five global destinations for Asian investment in H1 2017 were London (10%), New York (8%), Hong Kong (5%), Shanghai (4%) and Singapore (4%).
Intra-Asia investments continue to grow, finishing the first half at $10.4 billion and representing a 23% growth in total capital. Pacific markets were less attractive to Asian Investors, dropping 25% year-on-year to $1.6 billion.
"The appetite of Asian investors for high quality cross-border real estate assets remains solid and sustainable for the foreseeable future. The type of transactions and the geographic and sectoral diversity is where we see the most significant change in 2017, said Tom Moffat, Executive Director, Capital Markets, CBRE Asia.
In the first half of 2017, institutional investors from Asia continued to act as more influential players in the international real estate sector, supported by several marquee transactions in EMEA and the Americas. CBRE estimates that approximately 64% of all EMEA capital deployments and 35% of Americas capital deployments originating from Asia were committed by institutional investors.
Sectoral diversity also continues to be a major theme within asset strategies, with Asian outbound investors rebalancing real estate portfolios internationally. Office and logistics represent the most attractive commercial real estate sectors for Asian investors, accounting for 44% and 34% of all committed capital throughout H1 2017, respectively. Residential (7%), hotels (7%), retail (6%) and alternative sectors like aged-care housing (2%) remained niche investments globally.
Outbound investment from China remains the region's largest despite heightened regulation, with a new group of investors more active over the first half. Chinese sovereign wealth funds (SWFs) emerged as the largest single outbound investor class in the first half of 2017, driving total capital deployment to $25.6 billion versus $10.1 billion year-on-year. China-based property companies and conglomerates have also been considerable buyers of offshore real estate assets in the first six months of 2017.
A new round of capital controls was issued by the State Council and the National Development and Reform Commission (NDRC) on August 18, with a focus on offshore real estate investments. According to CBRE, this regulatory move may not affect the medium to longer term appetite for outbound investment, but potentially re-shape investment strategies going forward.
"Our data shows that China remained the largest source of cross-border commercial real estate investment capital (both new and capital already circulating offshore) from Asia in H1 2017. New regulations should help to ensure that future outbound investment is more financially sound and strategically focused, but the impact of Chinese capital on key global real estate markets should continue for some time," said Robert Fong, Director of Research, CBRE Asia Pacific.
Additional key findings include:
Non-Chinese investors more active: Outbound investors from Singapore ($6.8 billion), Hong Kong ($6.6 billion) and South Korea ($2.9 billion) remain active outbound investors and continue to deploy capital as Chinese investors rebalance portfolios.
Number of portfolio deals rising: Asian outbound investors are now more likely to deploy capital via portfolio transactions. In the first half of 2017, 26 portfolio deals were committed versus 13 in the first half of 2016.
Destinations becoming more diverse: Asian outbound investors are now looking beyond gateway cities when deploying capital into real estate. In the first half of 2017, the top five urban destinations comprised of 31% of all total Asian outbound capital compared to 54% in the first half of 2016.
China outbound diversity: Chinese capital continues to be deployed differently relative to the region. In the first half of 2017, the primary destinations of outbound investment were office (Americas), logistics (EMEA) residential (Japan) and hotels (Australia), representing the pull of diverse and quality real estate assets globally.