Asia Pacific investors play starring role in region's property flows

Asia Pacific institutional investors have become increasingly vital to the region’s real estate market, since late 2023, in both equity and debt segments, according to recent data provided to AsianInvestor.

“Repriced core assets across APAC’s traditional sectors are starting to look attractive again, particularly now that interest rates have begun their descent,” Ben Chow, vice president, head of real assets research, Asia for MSCI, told AsianInvestor.

Ben Chow
MSCI

Institutional investors are increasing allocations to APAC real estate as declining prices create attractive entry points.

Institutional investors and listed entities, such as REITs [real estate investment trusts], have increased regional allocation to 68% of total flows in the third quarter of 2024 from 48% of total flows in the fourth quarter of 2023, according to data provided to AsianInvestor by MSCI.

During this period, cross-border flows within Asia rose to 30% from 22% of the total.

Meanwhile, institutional and listed investors’ share of total European allocations to Asia decreased slightly to 54% from 56% over the same period.

FUTURE TREND

A recent survey by UK-based asset manager Schroders also suggests a similar trend.

The Schroders’ Global Investor Insights Survey, published on October 17, polled 2,830 investors, accounting for a total of $74.5 trillion in AUM, of which 795, accounting for $18.6 trillion, were based in the Asia Pacific.

Also read: Institutional investors eye Australian property debt plays

Chris Durack
Schroders

The survey revealed that 40% of APAC investors planned to increase their real estate equity allocations in the coming year, while 46% intend to boost real estate debt allocations.

These figures surpass European investor intentions where only 36% plan to increase real estate equity and 31% real estate debt allocations.

“With a relatively higher proportion of Asian investors also looking for exposure to country-level equities, they remain keenly focused on investment opportunities arising in the region as well, enabling them to achieve a balance between global diversification and higher growth opportunities in APAC” Chris Durack, head of Asia Pacific, at Schroders in Singapore told AsianInvestor.

Angela Lai
Preqin

However, Angela Lai, vice president and head of performance and valuations for Preqin in Singapore warns that diminishing international interest could constrain the region’s real estate market growth in the near term.

“The fading presence of foreign players, together with less fresh capital from real estate fund investment flowing into the region, may delay a return to the pace of pre-pandemic deal-making,” Lai told AsianInvestor.

Preqin data shows that Japanese investors dominated major real estate equity deals in APAC, accounting for 53% of transactions, while other regional investors contributed 32%. 

BROADER PRIVATE MARKET SUPPORT

Other private market segments also continue to attract APAC investors, although their planned allocation increases appear to trail those in other regions.

About 51% of APAC investors are planning to increase private equity allocations over the next year or two, compared to 56% in Europe and 58% in Central and South America, according to the survey.

Also read: Real estate investors eye Vietnam, India as China growth slows

For renewable infrastructure, APAC investors show similar conservative trends, with 48% planning to increase allocations, versus 50% in Europe and 66% in Central and South America.

The survey also found that 82% of investors in Asia Pacific are either already investing in private markets or have plans to do so in the next year or two – a rate that is similar to their global peers, with portfolio diversification and return potential the most popular reasons.

Sophie Fallman, managing partner and head of Asia Pacific for Brookfield’s global client group in Sydney, Australia told AsianInvestor that allocations to the company’s funds from investors in the regions remained strong.

It was particularly strong in its catalytic transition strategy, a decarbonisation  fund  with a significant focus on Southeast Asia. 

"Asia Pacific investors see first-hand the opportunities to invest across the region, and because they understand the nuances of the market better than many of their peers in the developed world, they use their local knowledge to their advantage,” she said.

This story has been updated to reflect additional comments from Chris Durack and Sophie Fallman.