Singapore, August 31, 2017 – International real estate continues to serve as an attractive asset class for investors, with Asian outbound investment into the sector posting significant year-on-year gains in the first half of 2017. Approximately US$45.2 billion of Asian outbound capital was directly invested into global property in the first half of 2017, according to CBRE, representing a 98.4% rise year-on-year against US$22.8 billion allocated in the first half of 2016.
Outbound investment from China remains the region’s largest despite heightened regulation, with a new group of investors more active over the first half. Chinese sovereign wealth funds (SWFs) emerged as the largest single outbound investor class in the first half of 2017, driving total capital deployment to US$25.6 billion versus US$10.1 billion year-on-year. China-based property companies and conglomerates have also been considerable buyers of offshore real estate assets in the first six months of 2017.
Recently, a new round of capital controls issued by the State Council and the National Development and Reform Commission (NDRC) on August 18 was issued, with a focus on offshore real estate investments. However, according to CBRE, this regulatory move may not affect the medium to longer term appetite for outbound investment, but potentially re-shape investment strategies going forward.
“Our data shows that China remained the largest source of cross-border commercial real estate investment capital (both new and capital already circulating offshore) from Asia in H1 2017,” said Robert Fong, Director of Research, CBRE Asia Pacific. “New regulations should help to ensure that future outbound investment is more financially sound and strategically focused, but the impact of Chinese capital on key global real estate markets should continue for some time.”
Singapore was the second largest investor in the first half of 2017. Singapore-based institutional investors, property companies and private equity ploughed US$6.8 bn into global real estate, a 20% increase from a year ago, and a little more than half of the full year 2016 tally of US$12.7 bn. In H1 2016, Singaporean investors allocated a total of US$5.6 bn in office, retail, mixed-use, industrial, hotel, residential and other commercial sectors. Development sites are excluded from CBRE’s analysis.
Top destinations for Singapore capital in the first half of 2017 include the U.S. (US$2.4 bn), China (US$1.2 bn) and Australia (US$635 mn).
Yvonne Siew, CBRE’s Executive Director, Global Capital Markets, Asia Pacific said “Singapore investors are poised to become major beneficiaries of heightened China capital controls. With the anticipated slowdown of outbound Chinese capital, Singapore investors have shown clear signs that they are both capitalized and confident enough to pursue outbound targets to both diversify portfolios and offset a competitive domestic landscape.”
Strength in Asian outbound investment was led largely by the preference of investors for big ticket deals in the global real estate sector. In the first half of 2017, 74% of committed investments were deployed into transitions valued at US$250 million and over, versus 56% in the corresponding period in 2016.
Geography-wise, Asian investors remain bullish on Europe, Middle East and Africa (EMEA) and the Americas, which drew US$21.9 billion—driven largely by a single US$13.2 billion from the logistics portfolio purchase—and US$11.3 billion in capital, respectively. Intra-Asia investments
continue to grow, finishing the first half at US$10.4 billion and representing a 23% growth in total capital. Pacific markets were less attractive to Asian Investors, dropping 25% year-on-year to US$1.6 billion.
CBRE’s analysis shows that the type of transactions and the geographic and sectoral diversity see
the most significant change in 2017.
In the first half of 2017, institutional investors from Asia continued to act as more influential players in the international real estate sector, supported by several marquee transactions in EMEA and the Americas. CBRE Research estimates that approximately 64% of all EMEA capital deployments and 35% of Americas capital deployments originating from Asia were committed by institutional investors.
Sectoral diversity also continues to be a major theme within asset strategies, with Asian outbound investors rebalancing real estate portfolios internationally. According to CBRE, office and logistics represent the most attractive sectors of the commercial real estate sector for Asian investors, accounting for 44% and 34% of all committed capital throughout the first half, respectively. Residential (7%), hotels (7%), retail (6%) and specific sectors like aged-care housing (2%) remained niche investments globally.
Additional key findings include:
Number of portfolio deals rising: Asian outbound investors are now more likely to deploy capital via portfolio transactions. In the first half of 2017, 26 portfolio deals were committed versus 13 in the first half of 2016.
Destinations becoming more diverse: Asian outbound investors are now looking beyond gateway cities when deploying capital into real estate. In the first half of 2017, the top five urban destinations comprised of 31% of all total Asian outbound capital compared to 54% in the first half of 2016.
Destinations becoming more diverse: Asian outbound investors are now looking beyond gateway cities when deploying capital into real estate. In the first half of 2017, the top five urban destinations comprised of 31% of all total Asian outbound capital compared to 54% in the first half of 2016.
China outbound diversity: Chinese capital continues to be deployed differently relative to the region. In the first half of 2017, the primary destinations of outbound investment were office (Americas), logistics (EMEA) residential (Japan) and hotels (Australia), representing the pull of diverse and quality real estate assets globally.
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CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2020 revenue). The company has more than 100,000 employees serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at https://www.cbre.com.
