Asian capital eyeing more outbound portfolio deals

Asian investors are showing an increasing preference towards investing in portfolio transactions in international real estate markets, according H1 figures from global property services firm CBRE.

In the first half of 2016 five of the top ten outbound transactions by Asian capital were portfolio deals. According to CBRE’s H1 Asian Outbound Investment Report, 36 percent of Asian investors acquired portfolios in overseas markets in the first half of 2016, a visible increase from the 29 percent in the same period last year, led by ambitions to rapidly expand their market coverage.

The biggest component of all outbound transaction remains big-ticket transactions – deals of more than $500 million accounted for 45 percent of the overall investments.

Chinese investors continue to dominate Asian outbound investments. Of the $27 billion in outbound investments recorded in the first half of the year, $16.1 billion was by Chinese sovereign wealth funds, insurance firms, conglomerates and developers.

“Asian capital, particularly Chinese, continues to display strong investment appetite in overseas markets, especially in global gateway cities, with the US remaining the stand-out target market. With the recovery of the US economy and its solid real estate fundamentals, Asian investors are focused on capitalizing on US assets. Concerns over the market slowdown in their home market have led Chinese investors to seek a safer investment environment which offer higher potential returns,” commented Ada Choi, senior director of research, CBRE Asia Pacific.

In terms of asset classes, the hotel sector has become the second most-traded asset, especially for Chinese investors, after office investments. Close to 33 percent of the total outbound investments were for hotel assets.

Marc Giuffrida, executive director, CBRE Global Capital Markets, added further: “Office investment continues to be an easily understood and managed asset class for most investors. However, as cap rates continue to compress globally, investors are starting to seek out higher yielding opportunities in secondary locations or ‘alternative’ real estate sectors, such as student housing. Early adopters who have existing experience in outbound investment are now looking at these sectors to diversify their portfolio. It’s interesting to see the year’s top outbound deals so far have included student housing acquisitions in the UK and US.”