Singapore institutions emerge as APAC's top property investors
Allocations to APAC property by institutional investors from Singapore over the first three quarters of 2023 surpassed those from the US for the first time on record, according to recent data from Real Capital Analytics (RCA) provided exclusively to AsianInvestor.
Singapore investors allocated $8.3 billion into APAC real estate, according to data from RCA, part of MSCI, compared with $7.3 billion from US investors.
Singapore allocations grew 7% compared with one-year earlier, while those from the US fell by 39%, according to RCA.
GIC LEADS THE WAY
The majority of Singaporean outbound flows came from a single investor: GIC.
“Sovereign wealth capital tends to adopt a much longer horizon when investing in commercial real estate, and this downturn has been no exception as GIC has consistently continued to invest across the globe,” Ben Chow, head of real estate research, Asia, at MSCI, told AsianInvestor.
The sovereign wealth fund has poured $38.8 billion into APAC property, over the last two years, according to RCA data compiled by Knight Frank.
Other large Singapore investors are Mapletree Investments, which has invested $3.9 billion over that period, CapitaLand Investment with $3.8 billion and Temasek, with $1.6 billion.
“Another major investor group are the S-REITs, who have adopted increasingly global mandates for deal sourcing, in contrast with their domestically-focused peers from many other markets,” added Chow.
MSCI
Henry Chin, global head of investor thought leadership and head of research, Asia Pacific, at CBRE also singled out SWFs and S-REITs in Singapore, adding that private investors had been important allocators, too.
“Singaporean investors are well-capitalised, keen for opportunities, and have been active across the region, in core and opportunistic, seeking both cyclical and structural opportunities,” he said.
Neil Brookes, global head of capital markets at Knight Frank, pointed to Singapore’s strong currency, high concentration of private offices and appetite from government-linked companies for the sector, to explain the new flows.
DRY POWDER POWER
“Many private offices and government linked companies in Singapore retain significant equity ready to be deployed.
Knight Frank
"The wider market dislocation caused by rapidly increased borrowing costs creates opportunities for all equity investors to deploy capital while many other institutional investors are sitting on the side lines,” he said, noting that Japan, China, South Korea, and Australia had been major beneficiaries of the new flows.
“The strength of the Singapore dollar is also driving large institutions such as GIC and other government-linked companies to pursue opportunities,” he added.
Chin said that credit strategies had proved popular, particularly in Australia, but the largest country for allocations was Japan.
“[In terms of flows] Japan is the winner for now due to the favourable terms of conditions and solid fundamentals across all asset classes. Investors are particularly keen on multifamily,” he added.
GIC has also been making snapping up Japanese real estate. The Singaporean investor has been investing in Japan since the 1990s and has a diversified property portfolio spanning key sectors including hospitality, logistics, residential and office.
In India, investors – notably developers and those seeking to make opportunistic allocations - were focussing on development opportunities in the office sector, he said.
Chow said the fall in US flows could be attributed to a cooling of domestic property funds, which continue to pursue a risk-off strategy in the region.
“In the US, outbound flows are dominated by fund managers, and much of their activity is driven by turning points in the business cycle,” he said.
RETAIL INTEREST
The biggest beneficiary of the new flows, proportionally, has been the retail sector, which has taken a large share of falling investor flows to office.
In particular, Chow pointed to purchases in mainland China and Australia’s regional shopping centre sector.
“Many of the cross-border retail deals in APAC were in markets where pricing had already adjusted significantly from last year’s levels. The biggest retail asset acquired by a cross-border investor was in China, where prices of commercial real estate had begun easing even before 2022,” he said.
“The regional centres were the only retail subtype in Australia to have missed out on the bout of yield compression in 2021, and with prices continuing to fall this year, a couple of these large shopping malls have been snapped up by Hong Kong-based investors,” he added.