BY Chris Prasad
The numbers are in, and not surprisingly, China is dominating outbound property investment flows from Asia in 2016.
According to research by international property consultant CBRE, in the first half of 2016, outbound investments from China accounted for 60 per cent of total investments, which was valued at over US$16.1 billion (RM64.8 billion). This figure is more than double the US$7.3 billion (RM29.4 billion) it registered for the same period in 2015.
CBRE also found that the United States is the overall favoured target region for Asian investors as New York has surpassed London as the top investment destination for Asian capital.
The good news from a regional perspective is there is also strong intra-regional activity within Asia as Asian investors are seeking to diversify their investment portfolio and hedge against domestic market risks.
Chinese conglomerates have been particularly active in Hong Kong , Japan and the Southeast Asian region.
“Asian capital, particularly Chinese, continues to display strong investment appetite in overseas markets, especially in global gateway cities, with the US remaining the stand-out target market,” said CBRE Asia Pacific’s senior director of research Ada Choi.
“With the recovery of the US economy and its solid real estate fundamentals, Asian investors are focused on capitalising on US assets. Concerns over the market slowdown in their home market have led Chinese investors to seek a safer investment environment which offer higher potential returns,” she said.
Choi said that Chinese insurance investors led outbound investment among the different investor types as they increasingly seek to diversify their overseas portfolios. She added that conglomerates and sovereign wealth funds also remain active and play a significant role in outbound investment since there is a huge supply of investible capital in China.
“The Asian outbound investment momentum will continue to be strong in the latter half of 2016 as there are still some pipeline deals expected to be completed by Asian investors. Chinese capital in particular will remain active, however, the growth will be at a more sustainable rate rather than a quick acceleration,” she said.
CBRE told global news website World Property Journal that the office sector remained the most-preferred asset class for Asian investors, accounting for nearly half of overall investment at 47 per cent. However, hotel properties continued to receive strong interest from Chinese investors, being the second most-traded asset with 33 per cent of overall investment.
Experienced Asian capital has also emerged to invest in alternative sectors such as student housing with two major deals completed within the first half of 2016 by Singaporean investors.
“Office investment continues to be an easily understood and managed asset class for most investors. However, as cap rates continue to compress globally, investors are starting to seek out higher yielding opportunities in secondary locations or ‘alternative’ real estate sectors, such as student housing. Early adopters who have existing experience in outbound investment are now looking at these sectors to diversify their portfolio,” said CBRE Global Capital Markets executive director Marc Giuffrida.
“We are also seeing increasing interest in forming partnerships and joint ventures with local developers or operators. Investors are keen to get scale, and platform investing or joint venturing with local expertise is an efficient way to achieve this, particularly if the strategy required specialised knowledge,” he added.
CBRE’s research revealed that in the first half of 2016, more Asian investors have shifted to invest in portfolio deals, increasing from 29 per cent to 36 per cent year-on-year, in order to rapidly expand their market coverage. Five of the top ten Asian outbound transactions this year were portfolio deals.