Despite tensions arising from the trade war between the United States and China as well as the slowdown in the global economy, Colliers International estimates that Asia-to-global property investments will likely rise by 21% to US$61 billion this year from US$50.5 billion in 2018.
Asian-based investors are more willing to invest in a more diverse range of assets than their counterparts in North America and Australia, while interest in European cities other than London, Paris and those in Germany is on the rise.
Meanwhile, cross-border capital flows within Asia is expected to grow by 10% to US$108 billion in 2019 following a 10% increase last year, while capital inflows into Asia from outside the region is projected to expand by 25% to US$30 billion this year.
At Colliers’ recent In-Out-Alt conference in Singapore, 71% of attendees said - in a poll - their firms will increase capital flows in Asia while 29% said they will look around the world.
In a dialogue session at the event, one panellist said his firm recently made its first foray into the United States, while another revealed that executives from her company went on a whirlwind tour of Europe last year to better understand the different markets there.
A third speaker said the search for investment opportunities outside the region was a natural outcome of more Asian capital being placed in the hands of professional managers. In contrast, high-net-worth individuals who manage their own money are more likely to stick closer to home.
Yields in Singapore have become very compressed, so it made sense for managers to head to Europe where it is easier to find yield accretive investments due to the wide spreads and low borrowing costs, he said.
“When players become institutionalised, people start looking at IRR (internal rate of returns) and start comparing different markets,” he added.
Singapore was biggest source of Asian outbound capital
In his presentation, Colliers’ Executive Director for Asia Research Andrew Haskins said Asian capital made up about 36% of global cross-border real estate investments last year.
Singapore, he added, took over from China as the biggest source of outbound Asian capital as tighter capital controls slowed the flows originating from China.
Haskins highlighted several strategies that investors can adopt in their search for yield and capital gains.
In the United States, for example, capital is shifting from primary to secondary markets such as smaller cities with fast-growing technology sectors. A similar trend is taking place in Europe where investors are looking not just at core markets like London and Paris but also secondary locations such as Amsterdam, Madrid and Lisbon.
Investors can also follow the occupiers when deciding on the cities and type of projects to park their money, using reports such as the regular surveys by Colliers to track the preferences of companies in the finance, technology and legal sectors.
Property owners should also be familiar with changing trends in the leasing market as sectors like technology become increasing important sources of demand. Unlike banks and law firms that tend to gravitate towards the central business districts of major cities, technology companies are also keen on smaller cities like Austin and Raleigh in the United States and Durham in the northeast of England.
Tech companies prefer shorter leases and generally demand longer, rent-free periods, he added.