Asian institutions eye new opportunities in US real estate

Asian institutional investors are eyeing opportunities in US real estate after the Fed's recent interest rate pause, and tightening supply in both the residential and industrial property market state-side.
Asian institutions eye new opportunities in US real estate

Asian institutional investors appear to be positioning themselves to take advantage of growing opportunities in a reviving US real estate market – and if they’re not, then perhaps they should be –industry experts have told AsianInvestor.

Todd Henderson, DWS

“While many Asian investors have been overallocated to real estate, or are waiting for valuations to reflect the current cost of capital, they’ve still been very interested in the space,” Todd Henderson, global co-head of real estate and head of real estate for the Americas at asset manager DWS, told AsianInvestor in an interview in Singapore.

“They’re now beginning to get very active in underwriting funds with the idea that they’re going to be making investments in the last part of this year or be in a position in 2024 to take advantage of what we believe is a pretty good vintage year for investing.”

Chris Pilgrim, managing director for Asia-Pacific global capital markets at real estate services firm Colliers, shared that view, noting that the US was home to the world’s most liquid real estate market, even in volatile times. Pilgrim added that the series of Federal Reserve interest rate increases over the past 18 months was impacting American real estate valuations, attracting “meaningful capital from the Asia-Pacific region”.

Chris Pilgrim, Colliers

“From an Asia-Pacific point of view, investors are waiting for the exact right moment [to boost allocations to US real estate],” he told AsianInvestor.

“We’re seeing far more interest in terms of product coming to market and investors looking for product and beginning to work to deploy their capital. This reflects the fact that there’s a consensus that interest rate rises are largely calming down, if not coming to an end. The US has been one of the fastest markets to reprice, which means it’ll be one of the first markets to start seeing capital again.”


Indraneel Karlekar, global head of research and portfolio strategies for real estate at Principal Asset Management, also said Asian institutional investors were gearing up to make fresh allocations to US real estate as the Fed moves towards the end of its monetary policy tightening.



Indraneel Karlekar,

“We’re going to see Asian investors remain very market cycle-focused, so I think we’ll see them re-enter real estate equity over the next two or three years,” he told AsianInvestor.

“Those investors that are invested are going to increase their allocations and those that are not, will add allocations to the US,” Karlekar added.

David Kathman, a senior manager research analyst at Morningstar Research Services said, “There are certainly opportunities for bargain hunting. The broader real estate investment trust (REIT) market has recovered quite a bit, but most people think there’s still a ways to go on the upside.”

David Kathman,

All four sources said that geographical and demographic factors made institutinal investors favour investment in locations in the country’s South, Southwest and Mountain West. But, specific sectors and themes were particularly bright, amid an improving overall picture.


“It’s very much following a ‘beds, meds and sheds’ approach,” Pilgrim said. “We’re seeing far more capital deployed in the living sector and the logistics sector, and when I say ‘meds’, that’s what we’re seeing as growth in the life sciences sector. It’s far more thematic around asset class than what we were seeing pre-pandemic or even a few years before that, when it was more new or trophy office assets we saw interest in.”

Henderson said, “We’re very much in the camp of industrial and residential, and investors very much are, as well. The industrial sector is attractive because we saw the acceleration of e-commerce as a result of Covid. But what also came out of Covid was the idea of supply chain security. We used to talk about just-in-time inventory, but now we’re talking about just-in-case inventory, because companies can’t afford not to be able to deliver their products, and so we’re seeing more warehousing, more storage as a result of that. We’re also seeing onshoring that’s benefiting the industrial warehouse base, so these things are very investable.”

Both Pilgrim and Karlekar said the logistics segment was becoming increasingly sophisticated, a trend that Asian investors could take advantage of.

“There’s been more adoption of micro-use classes within logistics,” Pilgrim said.

“For example, last-mile logistics wasn’t something we really talked about many years ago. Cold storage is becoming more relevant, and certainly among the investors we’re seeing from Asia-Pacific.”

Henderson said both industrial and residential real estate was in increasing demand, creating opportunities for Asian investors. Three factors that made those sectors attractive are reduced supply and low vacancy rates, lower prices, and the fact that US interest rates appeared to have peaked.


“There's a shortage of housing in the US by a couple of million units,” Henderson said.

“The supply pipeline, both in residential and industrial, is really diminished – down 30-40%. When you take that and combine it with strong fundamentals and low vacancy rates, that's a scenario for really strong rental growth and net operating income growth going forward.”

Pilgrim said investors could position themselves to tap rental growth in the multi-family and student housing segments, in which he had seen significant capital inflows from Asia-Pacific.

Karlekar added, “Now it's not just multi-family apartments, it’s single-family homes for rent – build-to-rent homes. There's a plethora of housing opportunities emerging in the US.”

Kathman echoed that sentiment, describing single-family home REITs as mainly a US phenomenon.

“There are several REITs that own single-family rental properties, and that’s helped by high interest rates, because with high interest rates, it's harder for people to buy a home,” he said.

“They're more likely to rent, but they still want a house and more room than they get in an apartment, so those REITs in the US have been doing pretty well.”  

Henderson said that when it came to spotting such opportunities in US real estate, Asian investors had historically been quick and were deploying capital once again.

“They tend to be a little bit ahead in terms of recognising market opportunities...and through a number of cycles, Asian investors have been early to come back. I’m in Asia now for a reason, and that reason is because Asian investors are starting to get very interested in the US real estate space again,” Henderson said.

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