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Three takeaways from CBRE’s latest Asian outbound investment report

Korean investors’ increase in outbound investing, growing appetite among Asian investors for alternative real estate and Paris replacing London were the notable trends from the broker’s annual research.

Outbound real estate investment from Asia fell 17 percent to $45 billion. Increased Korean activity was not enough to offset the continuing reduction in Chinese investors on the market’s international scene. Specifically, Asian investment in the Americas and in Europe and fell 53 percent and 13 percent year-on-year, respectively.

Beyond the headline numbers, here are three key findings from CBRE’s Asian Outbound Investment Report 2019.

Korean investors are now Asia’s big spenders

Outbound investment by Korean investors grew 66 percent year-on-year to $12.5 billion in 2019. Of that investment, 68 percent of the capital was deployed in Europe, 15 percent in North America and 17 percent elsewhere in Asia.

In Europe, Paris saw $3.9 billion of Asian investments from Korean investors in 2019. This preference in European markets can be explained by the country’s low financing costs and the hedging premium between the won and the euro, according to the report.

Henry Chin, head of research APAC and EMEA at CBRE, told PERE Korean investors became active overseas to diversify their asset holdings and profit from the relatively higher yield spreads available through offshore investments.

 

Although Europe represents a large proportion of the Korean capital, Korean investors are also ramping up their activities in the US where investment turnover increased by 33 percent year-on-year.

In 2020, Korean investors continue to show “the strongest interest” in investing abroad. But the pace of acquisition is “expected to moderate in the short term due to challenges related to syndicating overseas property assets in the domestic markets and a longer transaction process resulting from potential covid-19-related travel restrictions,” according to the report.

Investors show growing interests in alternative asset classes

Both Singaporean and Chinese investors spent less overseas in 2019, but both have been widening their real estate reach outside of traditional asset classes for diversification. The report pointed out that experienced Singapore investors such as Singapore Press Holdings and Mapletree Investments were very active in the student housing space in the UK, for example. The former purchased a portfolio in the UK for $579 million while the latter bought two buildings in the country for $117 million. Senior housing was an area of focus for Chinese investors. A landmark transaction was Cindat Capital’s acquisition of a UK-based portfolio for $232 million, according to the report.

Paris replaces London as the top destination amid a shift towards other European cities

Paris received $4.9 billion, 11 percent of total outbound investment from Asian investors in 2019, replacing London which received 17 percent of the total Asian outbound capital in 2018. The report explained the change can be attributed to “Brexit-related uncertainty and the limited availability of stock for sale.” But it also noted that with the assurance on decision over Brexit post the UK general election in December, London will likely regain investors’ interest in 2020.

Other European cities such as Dublin, Vienna, Milan, Prague and Warsaw also saw growing interest from Asian investors. Chin explained more experienced and sophisticated Asian investors are looking to these markets for higher returns, relative to the region’s gateway markets. But for first-time Asian buyers, major European markets are still their focus due to the simple taxation and legal system, according to Chin.