Asian investment in global real estate is on target to break records in 2016, according to research from CBRE, the Los Angeles-based property services advisor.
Following the release of data from the first half of the year, CBRE said the investment total was dominated by Chinese investors which accounted for 60 percent of the $27 billion figure.
In 2015, outbound Asian investment reached $47 billion, which in itself marked a tenfold increase on figures from 2009 when just $4.3 billion was invested. Back in 2009, CBRE said, approximately 80 percent of Asian investors’ capital outlay was in domestic markets, a proportion which has steadily declined in subsequent years, falling to 47 percent last year.
The research also showed Far East investors’ strong appetite for US assets in the first six months of 2016 with the Americas, with $14 billion of investment, accounting for 52 percent of outbound investment, followed by EMEA ($6.1 billion/22 percent), Asia ($5.4 billion/20 percent), and the Pacific ($1.6 billion/6 percent).
New York ($4.02 billion) was the top destination for Asian outbound investment, followed by London ($4.01 billion), Hong Kong ($2.1 billion), San Francisco ($1.4 billion), Chicago ($1.34 billion), and Sydney ($1.15 billion).
The research showed that office property is the preferred sector taking 47 percent of investment, followed by Hotels at 33 percent. There is also increasing interest from Asian investors in forming partnerships and joint ventures with local developers or operators to invest into new markets and niche sectors.
CBRE said it believed the appetite from Asian capital to invest outside of domestic markets has been steadily increasing since the global financial crisis. It added that Asian capital, led by investors from Singapore, China, South Korea and Hong Kong, has become more active in global real estate markets over the past three years in particular due to structural and cyclical changes.
Since 2012, China, Taiwan and South Korea have relaxed regulations on insurers permitting overseas real estate investment, increasing maximum allocations to real estate, and streamlining approvals. “The Asian insurance industry has enjoyed tremendous growth over the past ten years and insurers still have relatively low allocations to real estate,” said Chris Brett, head of international capital markets, CBRE UK.
“These investors will continue to increase their allocations to global real estate to both diversify portfolios and boost returns amid low or negative interest rates on government bonds and volatile equity markets,” Brett added.
Brett also said he believed new regions would emerge in the second half of 2016 and the first half of 2017.
“Japanese institutional investors could emerge as a new source of capital in the coming years, as most still have low or even no real estate holdings, and property companies, particularly Chinese and Singaporean groups, will continue to explore opportunities abroad to offset the downside risk in their home markets,” he said.