US investors remain top buyers of Asia-Pacific commercial property

By Cheryl Arcibalcheryl.arcibal@scmp.com

/ https://www.scmp.com/property/hong-kong-china/article/3003224/us-investors-remain-top-buyers-asia-pacific-commercial?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp |

April 1, 2019 6:37 PM SGT

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Investors from the United States continued to be the biggest spenders on commercial property in Asia-Pacific in the first quarter of 2019, according to New York-based data provider Real Capital Analytics, having surpassed their Asian counterparts in 2018.

According to the company, as of Monday, US investment in the region's property markets this year amounted to US$3.2 billion. Hong Kong was second with US$3.1 billion, followed by Singapore at US$636 million, Australia at US$528 million and mainland China with US$522 million.

"US cross-border investors are the largest importers of capital to Asia in absolute dollar terms, and are known for their global diversification," said Petra Blazkova, senior director for Asia-Pacific analytics at Real Capital.

Last year, investment in income properties " defined as office, retail, industrial, hotel, apartment and senior housing " in Asia-Pacific amounted to US$159.1 billion, a two per cent decline year on year, with the US as the top cross-border buyer of Asia-Pacific commercial properties. Investment from the US amounted to US$18 billion, more than double of Singapore's US$8.5 billion, the second-largest source. China was third with US$5.6 billion, followed by Canada's US$4.4 billion and Hong Kong's US$4.1 billion.

In 2017, China and Hong Kong, with combined investments worth US$17.6 billion, were the region's top investor. The US was the largest individual investment source with US$11.37 billion. Hong Kong was the second largest individual investor with US$10.8 billion, while China in fourth place contributed US$6.88 billion. Singapore was the third largest source with US$7.6 billion, and investment from Canada in fifth place amounted to US$2.6 billion.

Foreign investors charge into China's commercial real estate as credit squeeze hurts domestic developers

Blazkova said the increase in activity by US investors came in the form of deals such as Blackstone's purchases of Mapletree's Shanghai portfolio for US$1.2 billion and the Indiabulls Centre in Mumbai, Goldman Sachs' share of a joint venture to buy the Link Reit portfolio in Hong Kong, and KKR buying DAOR E&C's mixed-use portfolio in Seoul.

Asian investors, on the other hand, have faced a range of issues, including Beijing's capital curbs and the US interest rate increases, which weakened currencies of emerging Asian markets.

"Financing, however, is not the only risk troubling investors in the region. The introduction of tariffs and signs of a heightened trade war between the US and China could eventually impact the wider Asian economies and their real estate markets," said Blazkova.

Asia-Pacific offers a diversified set of markets, including Australia, which is 'one of the most transparent markets in the world', according to one industry insider. Photo: Bloomberg

Mary Ludgin, senior managing director and director of global investment research at Chicago-based global real estate investment management firm Heitman, said yields for class A office properties have historically been higher in some Asian markets relative to those in North America and Europe, due to a perceived risk of up to 50 basis points.

According to property consultancy JLL, US investors' rise to the top in Asia-Pacific was also partly down to many global private equity funds being domiciled in America.

Markets in Asia-Pacific also allow investors to diversify their asset mix. "There are diversification benefits in investing in Asia-Pacific, as the region remains the growth engine of the world," said Nicholas Wilson, head of Asia-Pacific capital markets research at JLL. He said private equity real estate funds are currently holding US$345 billion in their war chests, and Asia-Pacific presented a diversified set of markets, at varying levels of risk and return.

"There are safe haven markets like Japan, which offer extremely attractive funding costs and stable returns. Then you have one of the most transparent markets in the world in Australia," said Wilson. "There are a lot more growth markets as well in Southeast Asia, China and India, and then you have the financial centres in Singapore, Hong Kong and Shanghai."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.

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