Singapore tops Asian outbound property investment in 2019

By Charlene Chin / EdgeProp Singapore | March 5, 2020 4:02 PM SGT
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Singapore has topped Asian outbound real estate investment in 2019 for the second consecutive year, hitting US$15 billion ($20.9 billion). However, this is a 33% y-o-y decline from the US$22 billion in 2018, revealed global real estate consultancy CBRE in a report released on March 3.
Michael Tay, CBRE’s head of capital markets Singapore, attributes the city-state’s decline in investment volume to the lack of large portfolio transactions recorded in 2019. Compared to 2018, Mapletree Investments acquired two overseas logistics portfolios that amounted to US$4.2 billion.
There has also been a stronger interest among Singapore investors in alternative sectors such as student housing instead of office assets in 2019, says Tay. For example, Singapore Press Holdings acquired a student housing portfolio in the UK for US$579 million, while Mapletree Investments purchased two purpose-built student housing buildings in Coventry, UK, for US$117 million.
Asian outbound investment by destination (Source: CBRE Research)
Asian outbound investment by destination (Source: CBRE Research)

Asian outbound investment activity

Despite the overall decline in Asian outbound investment, some buyers in the region remain active. These include Korean investors, whose full-year outbound investment rose 66% y-o-y to US$12.5 billion. Of this, 70% was directed into European markets as buyers capitalised on low financing costs and the hedging premium between the won and euro, the report states.
Korean investment in US properties also increased by 33% y-o-y. Notable deals include Aju Group’s purchase of two Hyatt-branded hotels in midtown Manhattan for US$138 million as well as the Lotte Hotel–Hana Financial Investment joint acquisition of the hotel segment of F5 Tower — a mixed-use skyscraper in downtown Seattle — for US$175 million.
Direct investments by Japanese investors also picked up throughout 2019, pushing investment turnover by 40% y-o-y to US$3 billion. This was led primarily by Japanese property firms and conglomerates making acquisitions in the US. For example, a Sumitomo Corp subsidiary acquired its first office building in downtown Minneapolis for US$144 million.
In other Asian-related buying activity, a Thai conglomerate purchased a hotel portfolio in the UK comprising 17 properties for US$580 million. Hong Kong investors also displayed strong demand for prime assets in gateway cities abroad. In 2019, the Hong Kong Monetary Authority (HKMA) expanded its portfolio of office buildings in Sydney’s CBD. Hong Kong-listed Link REIT also acquired its first property in Sydney, which has a weighted average lease expiry of almost nine years. Meanwhile, Hong Kong-based K&K Property acquired an office building in London. That property already has an anchor tenant tied to almost 40% of space for the next 15 years.
On the other hand, Chinese outbound investment fell for the second consecutive year. CBRE observes that some investors have also shifted focus from the office sector to senior housing, as evident in Cindat Capital’s acquisition of a UK-based portfolio of senior housing for US$232 million in 2H2019.
Percentage of investors intending to invest outside Asia Pacific in 2020 (Source: CBRE Research)
Percentage of investors intending to invest outside Asia Pacific in 2020 (Source: CBRE Research)

Paris named top destination for Asian capital

In 2019, Paris — named top destination for Asian capital — attracted US$4.9 billion worth of deals, registering a significant increase in Asian investment over the year. Korean buyers were responsible for over 80% of these transactions.
On the other hand, London — the most popular destination in 2018 — weakened amid Brexit-related uncertainty and limited availability of stock for sale. In the same year, there was also a pronounced shift towards other European cities such as Dublin, Vienna, Milan, Prague and Warsaw.
Elsewhere, Sydney also continued to attract a steady wave of Asian capital seeking lower borrowing costs and the relatively easy availability of credit, CBRE says.

Future outlook

While the Covid-19 outbreak may impact investment in Mainland China this year, CBRE expects Singaporean buyers to retain a strong medium-to-long-term interest in that market. It also found that Singaporean investors possess a high intention to invest overseas in 2020, with North America, Western Europe and developed countries in Asia set to be the main geographies of focus, it adds.
The consultancy finds that investors from Korea displayed the strongest interest in investing abroad in 2020. The pace of acquisitions is however expected to moderate in the short term — due to challenges related to syndicating overseas property in the domestic market as well as a longer transaction process resulting from coronavirus-related travel restrictions.
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