Asia Pacific investors to increase global real-estate allocation to $78.2 billion this year

SINGAPORE (Jan 21): Asia Pacific investors are expected to increase their global real-estate allocation this year, with an estimated US$58.5 billion ($78.2 billion) of capital is set to flow into global real estate.

This is according to a global investment intentions survey jointly published today by industry associations ANREV, INREV and PREA.

The annual survey gathered responses from 337 participants, comprising of investors, fund managers and fund of funds. A total of 82 participants were from the Asia Pacific region.

Sixty percent of Asian investors say they expect to increase their global real estate portfolio over the next two years. The main reason is to tap into the benefits of a diverse multi-asset portfolio, followed by seeking enhance returns.

Asia Pacific investors are also increasing their real estate allocation to 11% from 9.8%. With low interest rates and low bond yields, real-estate as an asset class is relatively attractive when comparing to the volatile stock markets.

According to the survey, the most popular investment destination in Asia Pacific is Tokyo, followed by Sydney. Third place is a tie among popular cities, Beijing, Shanghai, Guangzhou, Shenzhen and Melbourne.

Office-market is the most preferred sector among investors, followed by industrial and logistic sector. Forty-five percent of investors are planning to invest in the Tokyo office market, while South Korea office sector is also favourable among investors.

The survey also found that 40% of global investors still expect to increase their allocation to non-listed real estate funds in Asia Pacific mainly from European and North American investors.

“Global cross border capital flows are set to benefit from increased allocations by Asia Pacific domiciled investors who tend to focus on a more direct approach via joint ventures and club deals or direct real estate investment,” said Amelie Delaunay, Director of Research and Professional Standards of ANREV.

On fund style, for the first time investors show an equal interest for core and value-added funds. On strategy, investors indicate equal preference for single or multi country funds, confirmed their preference for multi-sector funds and closed ended funds and generally large funds that have a GAV over US$650 million, with similar investors by company type.

Availability of suitable products is the main concern of investors, while investors and fund managers see the ability to achieve target returns as the main challenge for managers in the market.