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CBRE: High net-worths step up cross-border RE in Asia

Asia’s cross-border real estate activity rose by 5.5 percent last quarter to $5.2 billion overall, with high net-worth individual investors showing the fastest increase, according to a recent study by property services giant CBRE.

The large markets of Australia, Hong Kong, China and Japan led the charge of cross-border investments, with capital coming from both Asian and non-Asian buyers. The report pointed to the increased interest of sovereign wealth funds and pension funds from outside Asia Pacific (particularly the Middle East), Asia-based institutions and in particular, Asian high net-worth individuals seeking opportunities to place capital abroad.

Last quarter saw high net-worth individuals involved in several major deals, bringing their contribution to real estate investment to $631 million – a 69 percent increase quarter-on-quarter and a 571 percent increase year-on-year. Though a small portion of overall real estate investment activity, they were the fastest growing.

“High-net-worth investors are becoming more positive about the market, but increasingly they see value and returns coming from direct investments like real estate,” Greg Penn, CBRE’s managing director of Asia capital markets, said in the statement. “As a consequence they are diversifying away from their traditional equity and bond holdings to increase their exposure to real estate.”

Domestic investors in respective countries still make up the vast majority of investment activity – “they were able to move faster given their local advantages,” according to the report. Japan, for example, had a total of $19 billion in real estate investments closed over the past 12 months, only $2 billion of which came from non-domestic investors. The smaller markets measured by CBRE, including Taiwan, Malaysia and New Zealand, saw no cross-border activity.

The commercial sector still continues to make up the bulk of real estate transactions in Asia, even though office rents and demand have remained flat for some time. “Availability and yields for prime office assets remained tight and investors continued to broaden their focus to secondary locations and non-core assets, while foreign investors generally became more opportunistic,” Ada Choi, director of capital market research, Asia Pacific at CBRE, added.

As a result, foreign and domestic investors increased focused on less traditional assets with the promise of higher yield, with industrial sector transaction volumes in particular growing 75 percent to $2.9 billion last quarter.