A resurgence in demand last year among Asia-based investors for commercial real estate in markets such as the US, Australia, mainland China, the UK and Japan, led to activity that surpassed 2019’s pre-pandemic volume. New data from CBRE shows that after a muted 2020, Asian outbound investment in the asset class rose 69% year-on-year in 2021, to $54.6bn.
Singaporean capital was dominant, accounting for six out of the top 10 outbound transactions. In total, investors in the city-state deployed $32bn overseas, marking a 164% jump on the previous year. Investors in Hong Kong also stepped up their purchases; it was the second most active source of Asian outbound capital last year, with $6.7bn invested, representing a 60% rebound year-on-year. “Investors from Singapore and Hong Kong were the most active due to the size of their markets and available liquidity, explained Greg Hyland, CBRE’s head of capital markets for Asia Pacific.
In addition, the US was the preferred international market for Asian investors due to attractive US dollar hedging costs and its robust economy relative to Asia as business travel normalises, Hyland added.
Selective on markets and sectors
Across the target destinations, Asian outbound investment in industrial and logistics assets exceeded office transactions in 2021 for the first time, hitting $24bn. As a result, global yields are expected to compress further for the industrial sector. Within the Asia Pacific region, however, there is more optimism that yields will remain stable and attractive.
Activity in 2021 saw Hong Kong cross-border investors focus on retail and office assets in mainland China. Korean institutional and real estate investment funds favoured office assets in Australia and the US. Trends by geography are also noteworthy; the data showed the UK being the only European market to record a significant inflow from Asian capital in 2021. Instead, more investors have shifted their emphasis back to Asia Pacific, where CBRE said they can rely on stronger networks and local expertise to execute and evaluate deals.
“The majority of Asian investors are expected to deploy more capital this year with a particular focus on North America and regional gateway markets, such as Tokyo, Shanghai and Sydney,” said Henry Chin, global head of investor thought leadership and head of research, Asia Pacific for CBRE. The likely attractive assets for investment in these locations in 2022 are tipped by CBRE to be: grade B offices, retail and multi-family in Tokyo; offices, business parks and logistics in Shanghai; and offices, retail, hotels and logistics development in Sydney.
In line with these trends, the firm said it expects cross-border investments to grow by up to 10%, to $39bn in 2022.