Asian outbound real estate investment reached another record high year during 2015, standing at US$ 62.4 billion – a 37 percent year-on-year increase according to research from real estate firm CBRE.
Underpinned by more active institutional investors from Singapore and China, 2015 saw a significant increase in big ticket transactions (deal size worth over US$ 500 million; up 167 percent year-on-year) and portfolio transactions (accounting for 28 percent of total Asian outbound investment turnover, up from 16 percent in 2014).
Active sources of capital continued to be led by Singapore, China and Hong Kong, with an increase of outbound capital deployment at 58 percent, 41 percent and 49 percent year-on-year, respectively.
Outbound investment into major gateway cities were more diversified. London, as the top destination of Asian investors, has contributed to a lower portion of outbound investment, decreasing from 17 percent in 2014 to 13 percent in 2015. On the contrary, other major gateway cities such as New York, Sydney, Shanghai and Hong Kong have all received a higher proportion of Asian investments in 2015.
The Americas have overtaken EMEA to become the top region attracting the largest share of Asian outbound investment, reaching US$ 22.4 billion (up 109 percent year-on-year). The Pacific region also saw significant increase of Asian investment (up 45 percent year-on-year). Meanwhile, growth rates in EMEA (up 7 percent year-on-year) and within Asia (up 12 percent year-on-year) are relatively moderate.
Ada Choi, Senior Director, CBRE Research Asia, said: “Following the positive momentum of last year, Asian outbound investment has reached another record high year in 2015. The low yield environment in Asia continued to encourage investors to capitalize in markets offering higher potential returns.
“We expect that the Asian outbound investment momentum will continue in 2016 as major players are still building up their global portfolios while other players are catching up.
“Asian institutional investors continued to lead outbound investment among the different investor types. While Chinese and Singaporean sovereign wealth funds completed a number of major portfolio deals outside Asia, insurance companies from China and Taiwan are increasingly expanding their overseas portfolios, and we saw more new insurance companies acquiring their first property outside their home country.
“Property companies also became more active in the international market, particularly Singaporean groups which were involved in two major portfolio deals over the year.
“While we see dominance of the four major capital sources, namely Singapore, China, Hong Kong and South Korea, there is more activity coming from other parts of Asia, such as Taiwan and Thailand.
“There is also more Japanese interest on the global investment market but they may take indirect investment routes via funds.
Marc Giuffrida, Executive Director, CBRE Global Capital Markets, added: “Perhaps the biggest highlight of the year is the huge increase in big ticket and portfolio transactions.
“Outbound volume with deal sizes of over US$ 500 million increased more than two-fold. However, experienced Asian investors have increasingly opted for purchasing portfolios to rapidly expand their market coverage rather than eye-catching headline trophy assets.
“Geographical diversification has been one of the top reasons behind investing in overseas real estates. This year we saw investments amongst the top global gateway cities becoming more evenly distributed; London received a reduced share of Asian investment while New York is catching up fast as the second most popular city, thanks to the relatively strong economic growth in the US.
“Alongside the diversification amongst gateway cities, Asian investors continue to increase exposure into other regional cities in the US such as Washington, Chicago, Los Angeles metro, Dallas and Houston for example. Germany and Spain have also received larger shares of Asian investments while Sydney still dominates transactions in Pacific.
“The office sector remained the most-preferred asset class, but hotel and industrial assets continued to receive strong appetite from Asian investors.
“The industrial sector recorded significant uptick in activity mainly driven by two major industrial portfolio deals closed in the US, due to the strong US dollar driving an increase of consumer spending on imported goods and the solid growth in e-commerce, translating into demand for warehouse space.”