Asian investors’ growing appetite for CRE in 3 charts

Real estate investment volumes in Asia-Pacific reached $81 billion in the first half of 2018, a 30 percent increase year-on-year, according to data published by the real estate services provider JLL in August.

The increase in transaction volumes, according to Stuart Crow, head of Asia-Pacific capital markets at JLL, is supported by a continued cyclical recovery in developed markets like Hong Kong, Australia and Japan.

Transaction volumes in Hong Kong increased almost three times to $14.5 billion in H1 2018 from the same period a year ago, despite rising real estate prices in the Central business district.

“Between 2015 and 2017, mainland buyers spent an average of $2.1 billion per year on offices in Hong Kong,” said Joseph Tsang, head of capital markets at JLL Hong Kong. “This year is set to exceed that figure, given that, to date, there has been more than $2 billion worth of office acquisitions already transacted.”

Tracking outbound deals

Foreign net commercial real estate investment by Asian investors in the first half of 2018 was $7.57 billion. Even though these volumes are less than half of the $16.2 billion invested in the first half of 2017, Asian investors remain the most active cross-border buyers of real estate. European and US investors have sold more real estate than they bought this year so far.

The drop in Chinese outbound investment due to capital controls has caused a dent in the overall Asia-Pacific outbound transaction volumes. However, as JLL pointed out, investors from Hong Kong, Singapore and South Korea have been actively deploying capital, especially in Europe. South Korean purchases in Europe for instance were double than those made in the US at the half-year mark in 2018.

“While many of these investors have favoured the US in recent years, pricing pressure in core markets and rising hedging costs are driving many Asian groups to consider investments in Europe,” Crow said.

Asian investors have also been actively acquiring assets disposed by global real estate funds. According to JLL, the group acquired 18 percent or $5.6 billion worth of real estate from the $31.5 billion in total disposals made by global funds in H1 2018.