Asia overtakes North America as Asian investors’ top cross-border choice – CBRE

Buying opportunities will come from both expiring closed-end funds and developers motivated to sell to either repay debt or recycle capital.

Asia-Pacific has become the most preferred region for cross-border real estate investment for Asian investors in 2021, overtaking North America for the first time since 2015, according to CBRE’s 2021 Asia Pacific Investor Intentions Survey.

As Asia continues to show better success in containing the pandemic than North America and Europe, more Asian investors have opted to keep their investments within their home region. In fact, the percentage of Asian investors that identified developed or emerging Asia as their preferred region for cross-border investment doubled from 32 percent in 2020 to over 65 percent in 2021, according to the survey, which compiled responses from more than 490 Asia-Pacific-based investors in November and December 2020.

Meanwhile, investors that chose North America as their preferred region dropped significantly from 41 percent in the 2020 report to 22 percent in 2021.

“In the past few years, a lot of Asian investors have been looking at the US and Europe,” said Henry Chin, CBRE’s global head of investor thought leadership and head of research, APAC. “But as travel restrictions continue to be in place, investing within their home region makes the most sense. Also, everyone is expecting the Asia economy to bounce back first as the region is showing better control of the pandemic now.”

Chin pointed out that investment sentiment for the US and Europe had been negatively affected by the news of the worsening pandemic situations in those regions.

The results of ANREV’s Investment Intentions Survey 2021, which was also released this week, were consistent with CBRE’s findings. Most of ANREV’s Asian investor respondents expected the majority of their 2021 investments to be deployed to their home region.

Although North America has fallen out of favor for many Asian investors this year, the report stated that Korean and Japanese investors remain keen for US real estate as they look to diversify their portfolios. Such interest has also been accelerated by a lower hedging cost due to a weaker US dollar.

Within Asia-Pacific, 38 percent of investors preferred developed Asia, compared with the 27 percent that preferred the emerging parts of the region. That being said, three Chinese cities were among the top 10 most preferred cities in the region. In addition, Vietnam’s Ho Chi Minh City entered the top five for the first time thanks to the diversification of supply chains and more manufacturing investments flowing into the country.

“You won’t be surprised to see more sophisticated and experienced investors like GIC go into the emerging markets or niche sectors,” Chin explained. “But for most Asian investors, they want stable income and still want to be in developed Asia.”

In terms of investment opportunities in Asia-Pacific, Chin expected at least $31 billion of assets to be put up for sale between 2021 and 2022 as a number of close-end funds expire during this period. He said that about $10 billion of the $31 billion of assets are in funds that cannot be further extended and have to be sold, and that most of the $10 billion of assets are in China.

The report also noted that, apart from funds, buying opportunities could also emerge from developers that will be motivated to sell this year to repay debt or recycle capital. For example, a recent policy change in China encourages developers to replenish their liquidity and offload their current assets.

Overall, the report concluded that the stronger overall investment sentiment and greater availability of assets for sale will boost 2021 investment volume in the region by five to 10 percent from last year.