Asian Outbound Property Investment Sets Record in 2014
According to CBRE, Asian outbound investment in commercial real estate last year was record-setting. CBRE reports Asian outbound real estate investment reached $40 billion--reflecting an increase of 23% year-on-year.
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.
Investment strategies have begun to evolve as investors look beyond traditional gateway markets. In 2013 60% of outbound investment focused on five global investment destinations, but in 2014 this reduced to 39%. Notable beneficiaries of this trend in 2014 included Paris in Continental Europe and Los Angeles, San Francisco and Washington in the US.
Asian cross-border real estate investors also began to diversify in terms of asset classes; investing more in hotels and industrial--though office continued to dominate.
EMEA continued to receive the largest share of Asian investment, receiving US$13.7 billion of the total, but remained flat on 2013. Other regions saw substantial increases in Asian investments: Americas (up 20% year-on-year), Pacific (33% year-on-year) and Asia intra-regionally (58% year-on-year). In Asia, Japan was the leading target destination, followed by China.
Ada Choi, Senior Director for CBRE Research Asia, commented, "Outbound investment for whole year 2014 surpassed 2013, the second year in a row the region has reached a record high. Singapore maintained its position as the number one source of outbound capital, closely followed by China and Hong Kong--with all three markets showing an increase in cross border investment. Singaporean investors looked offshore as a result of compressed yields in their home market and a shortage of investible assets, while Chinese outbound growth was in particular 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.
"We also saw Chinese property developers increasingly active in international markets. Alongside more direct investment, more experienced Asian institutional investors from places such as 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."
Marc Giuffrida, Executive Director, Global Capital Markets Asia added, "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. The second half of 2014 saw Chinese and Taiwanese insurers begin to feature prominently in global real estate markets.
"Alongside the emergence of new capital, the early adopters of global investing are starting to evolve their strategies beyond the traditional gateway cities. While the acquisition of trophy assets continued to attract headlines, and New York and London remain the top
destinations for investment, perhaps the biggest untold story for 2014 has been the movement into secondary gateway cities such as Paris and LA as well as regional centers of the UK. 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.
"Likewise, there is a shift in the types of assets 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. Investors feel that by looking to new markets and asset classes they will be able to secure better yields and face less competition from other investors."