Institutional investors return to Asia Pacific property
Data showing a return by global investors to the Asia Pacific (APAC) real estate market has been backed up by advisors in the region, fuelling hope that the troubled sector could be on the way to recovery.
Helped by strong flows in Q3, institutional investors’ share of flows into APAC’s real estate market in the first nine months of the year reached their highest level for two years, according to the MSCI Capital Trends, Asia Pacific report released in late November.
The institutional share of investment flows grew significantly for Australia – increasing from 55% to 63% – Singapore – up from 63% to 75% – and South Korea – up from 61% to 71%, according to the MSCI report.
The share shrunk slightly in Japan and grew very slightly in Greater China; across the rest of APAC it increased from 45% to 53%;
MSCI
“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 in Singapore for MSCI, told AsianInvestor.
Ada Choi, head of research, Asia Pacific, at CBRE in Hong Kong said her firm expects investment activity to strengthen as investors' risk appetite grows and rate cuts begin.
CBRE
"More acquisition opportunities will emerge as interest rates drop in most Asia Pacific markets and the price gap between buyers and sellers narrows,” Choi told AsianInvestor.
Setting expectations for a real estate revival in Asia, market veteran Simon Smith, senior director, research and consultancy, at Savills, points to the dual catalysts of monetary easing and robust economic fundamentals.
“As inflation is now within target ranges in many of the region’s economies and the Fed has embarked on an easing cycle, central banks have begun to lower [rates], and this should provide a modest boost to the real estate investment outlook," Smith told AsianInvestor.
"At the same time forecasts for GDP growth suggest a reasonably upbeat year for business prospects and occupier demand."
These predictions are supported by pipeline data from MSCI which show volumes in early October close to the 2021 peak, supported by a broad-based increase across all major sectors.
Deal numbers are set for a boost in the coming weeks when when Blackstone’s $16 billion acquisition of regional data center operator AirTrunk, announced in September, comes to completion.
SOUTH KOREA, SINGAPORE SURGE
Flows into South Korea’s real estate sector increased by 24% in Q3 compared with one year earlier, reaching 6.3 billion. After China – up 15% to 9.3 billion it was investors’ favoured country.
MSCI's analysis highlighted South Korea's dominant office sector, particularly in Seoul, which represented the majority of transactions.
The broader market revival is even more telling, as the report observed: "The industrial sector, which endured a quiet 2023, has surged by more than 50% as investors target repriced core logistics assets."
Following a very poor Q3 2023, flows into Singapore’s market increased five-fold in Q3 2024, to $3 billion, according to MSCI data. The growth was helped by a surge in life science deals.
In August a joint venture between Warburg Pincus and Lendlease acquired Blackstone’s Singapore life science portfolio for S$1.6 billion ($1.2 billion).
The same month, sovereign wealth fund Brunei Investment Agency bought a 49% stake in Elementum, a life science complex in the city-state's One North tech park, from Ho Bee Land for S$272 million ($205 million).
Listed REITs have also become more acquisitive this year. In September, CICT made a $1.4 billion acquisition of a 50% stake in Ion Orchard from sponsor CapitaLand, which was Singapore’s biggest single asset deal of the year so far.