, Singapore

3 in 5 APAC investors to snap up more real estate this year

Tokyo is the most preferred city for cross-border investment.

Sixty percent of investors intend to purchase more real estate this year, the highest level since 2016, according to CBRE’s 2021 Asia Pacific Investor Intentions Survey.

The survey, which polled more than 490 Asia Pacific-based investors in November and December 2020, found most investor types – from high-net-worth individuals and REITs to institutions such as sovereign wealth funds, insurance companies and pension funds - are exhibiting stronger appetite for real estate investments compared with last year.

The higher purchasing intentions are a consequence of pent-up demand from 2020, when the abrupt, pandemic-induced economic downturn, travel restrictions and uncertainty about the pandemic’s duration sharply curtailed investment activity. In addition, there remains a substantial volume of dry powder (capital that is committed but unallocated) searching for yield and ready to be deployed into real estate.

Despite ongoing travel restrictions, Asia Pacific investors are more comfortable with cross- border investment than in 2020. More than 70% of respondents intend to purchase overseas assets in 2021, the bulk of which is expected to be within Asia.

Tokyo retained its position as the most preferred city for cross-border investment. The availability of high-quality assets and strong liquidity has made Tokyo a top-three investment destination since 2018. The survey also uncovered increased investor interest in Singapore, which ranked second and Seoul, which made the top three for the first time.

Other major movers included Ho Chi Minh City, which reached the top five for the first time. While Hong Kong SAR fell out of the top ten, several foreign investors are understood to be considering opportunistic plays in this market following the recent price correction. Shanghai (#4), Beijing (#6) and Shenzhen (#7) all ranked in the top ten for the first time, with investors likely lured by China’s relatively quick containment of the pandemic and swift economic recovery.

“While some investors may be compensating for inactivity in 2020, these upbeat findings reflect a broad-based improvement in market sentiment in recent months,” said Greg Hyland, CBRE’s Head of Capital Markets, Asia Pacific. “With the recent launch of vaccination programmes in several markets further boosting expectations of a gradual economic recovery, improved investment sentiment and more asset availability are expected to support an increase in investment volume by 5% to 10% over last year.”

This year’s survey identified a shift in investors’ strategies, sector focus and target sectors compared with previous years. Since the onset of the pandemic, CBRE has observed that many investors have adopted a two-tier investment strategy focusing on core or opportunistic/distressed assets.

“Stronger interest in core investment reflects investors’ greater emphasis on tenant credit and stable cash flows. Assets with a solid rent roll of three years or longer typically attract far more bidders than those lacking this type of security,” said Dr. Henry Chin, CBRE’s Global Head of Investor Thought Leadership and Head of Research, Asia Pacific.

“On the opportunistic front, investors continue to deploy capital into a range of development projects including build-to-rent schemes in the Pacific and speculative logistic facilities across both Asia and Pacific. Distressed assets are also now back on investors’ radar for the first time since the Global Financial Crisis, with opportunities emerging in Mainland China and India,” added Dr. Chin.

The shift to core and opportunistic/distressed strategies is being accompanied by a more cautious approach toward core-plus and value-added plays due to elevated vacancy risk and the pandemic’s prolonged duration.

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