Asia Pacific real estate investors eye opportunistic deals in 2023: CBRE
/ EdgeProp Singapore |
In 2023, more Asia Pacific real estate investors are targeting opportunistic deals, distressed assets and non-performing loans, notes a survey by CBRE (Picture: Samuel Isaac Chua/The Edge Singapore)
SINGAPORE (EDGEPROP) - In December 2022, Hong Kong-listed Link REIT signed a deal to purchase two Singapore shopping malls — Jurong Point and Swing By @ Thomson Plaza — from NTUC unit Mercatus Co-operative for $2.16 billion. The purchase price is a 6.1% discount to the combined aggregate value of $2.3 billion for the two assets as at Dec 28, 2022.
Earlier this month, Goldin Financial Global Centre (GFGC) — a 28-storey Grade A office tower in Kowloon East, Hong Kong — was sold for HK$5.6 billion ($947 million) to a 50:50 joint venture between Singapore’s Mapletree Investments and Hong Kong investment firm PAG. It marks the end of a legal tussle spanning more than two years between creditors and distressed conglomerate Goldin Financial Holdings, which Hong Kong property tycoon Pan Sutong controls.
Receivers seized the former headquarters for Goldin Financial in July 2020 after the company defaulted on debts. It saw several failed sale attempts, including a HK$14.3 billion deal announced in September 2020, which was later terminated.
These transactions are the latest examples of Asia Pacific (APAC) real estate investors shopping for discounted or distressed assets amid a broader shift towards more opportunistic strategies. According to property consultancy CBRE’s 2023 Asia Pacific Investor Intentions Survey, 31% of investors polled are targeting opportunistic deals, distressed assets and nonperforming loans, increasing from 26% the year before. In addition, 60% of the US$39.7 billion in funds raised by APAC-focused real estate funds in 2022 involve opportunistic strategies — the highest amount in a decade.
Source: CBRE 2023 Asia Pacific Investor Intentions Survey, CBRE Research, January 2023
This growing preference comes in response to current market conditions, including the rising cost of finance and mild yield expansion, which are diminishing the appeal of core strategies, adds CBRE. Greg Hyland, the consultancy’s head of capital markets, Asia Pacific, also points out that investors stay prudent amid the macroeconomic headwinds. He adds: “Despite healthy fundraising levels, most investors are adopting a cautious approach as they look for signs of yield expansion and the interest rate tightening cycle to stabilise.”
This cautious approach is expected to continue in 2023, underpinning the wait-and-see stance adopted by investors since the latter half of 2022. However, Hyland expects investment activity in APAC to accelerate in the latter half of the year, supported by more clarity on economic conditions and China’s reopening.
Buying intentions, preferred asset classes
The survey supports Hyland’s optimistic view, which finds that most (93%) APAC institutional investors expect their allocations to real estate to increase or remain stable in 2023. In addition, the survey also found that high-net-worth individuals, family offices and private investors displayed stronger buying intentions with a focus on core prime assets and selected opportunistic deals.
The consultancy says industrial and logistics are among the most preferred asset classes, followed by office and residential. “While there is a drop in interest in office largely due to concerns about the current level of yields, the survey finds that core investors still opt for offices as their top choice,” adds Henry Chin, global head of investor thought leadership and head of research, Asia Pacific for CBRE.
Source: CBRE 2023 Asia Pacific Investor Intentions Survey, CBRE Research, January 2023
CBRE anticipates high quality, prime offices in CBDs across APAC will remain sought after, given limited future supply and strong demand from corporates seeking better quality office space. Chin adds that investors show a much stronger interest in the residential sector, particularly in multifamily and built–to-rent assets.
In contrast, hotels and retail assets continue to see weaker interest from investors in light of challenging market conditions. CBRE says the weaker interest underpins more conservative pricing expectations for retail assets, with over 60% of survey respondents expecting to secure a discount for shopping malls and high street shops.
Only 5% of the survey respondents indicated an intention to invest in alternative assets. But among this group, CBRE says that healthcare-related properties — including life sciences and medical offices — have overtaken data centres as the top choice among investors. Interest in data centres fell this year, mainly due to these properties’ high carbon emissions stemming from their substantial consumption, it adds.
Top investment destinations
Among APAC investment destinations, Tokyo emerged as the top preferred city for cross-border investment for the fourth consecutive year, while Singapore came second. The two countries continue to be a focus for core and value-add investors, supported by solid market fundamentals.
Source: CBRE 2023 Asia Pacific Investor Intentions Survey, CBRE Research, January 2023
Within Southeast Asia, Vietnam’s Ho Chi Minh City was ranked third, while the country’s capital city Hanoi also entered the top 10. CBRE says that Vietnam continues to benefit from its status as a China-plus One destination, prompting interest from investors seeking out value-add and opportunistic deals in this market.
The consultancy also says Hong Kong has ranked within the top five investment destinations for the first time since 2020. With the reopening of the border with mainland China and more reasonable valuations, investors again find Hong Kong attractive, adds the report.
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