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CBRE: Investors eye $100bn in Asian RE for 2014

Investors in Asian property have become polarized on opposite ends of the risk spectrum as their commitments grow, according to the world’s largest property services firm.

Following a record year in real estate investment, investors in Asian real estate are expecting to increase their investment in the asset class by roughly 10 percent overall this year to just under $100 billion, according to CBRE’s Asia Pacific Investor Intentions Survey 2014.

Data collected by the world’s largest property services firm indicated that 63 percent of investors targeting Asia expected their purchasing activity in the Asia Pacific property market in 2014 to be higher than what it was in 2013. Even though total real estate investment in the commercial property sector reached $90.4 billion last year, the highest it’s been since 2005, CBRE said the increase could be 10 percent overall.

About one third of investors in the survey expressed an intention to increase their real estate investment by 20 percent this year, while another one third said they would increase their investments by 10 percent to 20 percent. If this goal is reached, 2014 could see approximately $99 billion committed to Asia-Pacific real estate.

“Investors are not just planning to commit more capital to the region, they are looking to commit substantially more,” Greg Penn, CBRE’s managing director for capital markets Asia, said. “The attractiveness of Asia Pacific as a region persists as a result of economic growth levels that remain higher than global averages, long-term demand for quality commercial property and rapid urbanization.”

Nonetheless, the investors polled in CBRE’s survey expressed concerns over current investing conditions in Asia. According to the poll, 23 percent pointed to an economic slow-down as a concern, 21 percent pointed to overpricing, and 17 percent feared the effects of US tapering and interest rates rising.

“Given the obstacles investors have named, they will have to explore investment methods other than direct investing,” the firm’s Asia research director Ada Choi said. That assertion was backed by the findings of CBRE’s survey which noted how investors were becoming polarized in their approach to investing, opting for strategies at either end of the risk spectrum: 44 percent of investors indicated a preference for value-added/opportunistic strategies, while 29 percent preferred prime/core assets. The remaining 32 percent of investors were split between secondary assets and distressed opportunities.

“Given the low yield environment and chronic shortage of core assets in Asia, investors are showing a preference for riskier investments and are looking for value-added opportunities,” Choi said. “This trend partly explains why a larger percentage of funds recently raised were focused on opportunistic strategies.”