Singapore topped Asian outbound real estate investment for the third consecutive year, accounting for US$12.1 billion worth of deals in 2020 – albeit reflecting an approximate 31% y-o-y decline from US$17 billion registered in 2019, according to new data published by CBRE.
Meanwhile, Korea is the second-largest source of outbound funds overall, accounting for nearly half of Asian outbound investment stateside due to the Korean won’s lower hedging costs against the US dollar.
Mainland China was third in terms of weight of outbound capital, underpinned by several major purchases in Australia. Although outbound investment from Mainland China rebounded slightly, the total figure remains well below historical highs.
Across the region, Asian outbound commercial real estate investment volume declined 37% y-o-y to US$30 billion in 2020, as pandemic-related obstacles including restrictions on travel and site inspections impeded purchasing activity.
On Singapore’s performance, Greg Hyland, Head of Capital Markets, Asia Pacific, weighed in, “Singapore investors look to invest overseas because the pool of assets available at home is relatively small. What’s more, when it comes to overseas acquisitions, Singapore investors are generally well regarded as a sophisticated and savvy group who are used to investing offshore, while being prudent as to where they invest in their search for what they conclude will give the best risk-adjusted returns.”
In 2020, the top real estate investment destinations for Singapore investors include Beijing, London and Seoul.
Top Destinations for Asian Outbound Investment in 2020
1- United States – $7 billion
2- United Kingdom – $4.5 billion
3- Australia – $3.8 billion
4- Mainland China – $3.6 billion
5- Germany – $2.2 billion
Across the region, the U.S. was the top destination for outbound capital in 2020, attracting US$7 billion worth of funds, followed by the U.K., Australia, mainland China and Germany. Asian outbound investment into the U.K. held largely consistent with 2019 levels as strong liquidity and attractive yield compared to continental European markets largely offset Brexit related uncertainty.
“Despite the weaker outbound investment volume in 2020, we are optimistic that real estate investment will pick up over the next 12 months. CBRE’s 2021 Asia Pacific Investor Intentions Survey found that 70% of investors in the region intend to purchase assets overseas in 2021, suggesting a mild recovery in Asian outbound investment volume this year,” said Dr. Henry Chin, Global Head of Investor Thought Leadership and Head of Research, Asia Pacific, CBRE.
“Owing to ongoing travel restrictions, investors’ familiarity with Asia and the region’s anticipated strong economic rebound, the bulk of these acquisitions are expected to be within Asia in markets such as Tokyo, Singapore, Seoul and Mainland China tier I cities. Looking beyond Asia, the U.S. and U.K. are projected to remain among the top destinations for outbound capital, supported by lower hedging costs and positive yield spread, respectively.”
Logistics was the only sector to record an increase in Asian outbound investment over the year, with US$7.2 billion worth of deals concluded, a significant increase on the US$5.1 billion inked in 2019.
CBRE expects the pandemic-driven acceleration of e-commerce consumption to further boost demand for this asset class in 2021, with portfolios remaining keenly sought-after.
Interest in logistics assets in the U.S., which accounted for more than half of Asian outbound investment into the sector last year, will remain robust, supported by relatively high asset availability and the falling hedging cost of U.S. dollar denominated assets.
Mr Hyland said, “While the pandemic inevitably led to a downturn in Asian outbound investment in 2020, buyer appetite for overseas acquisitions remained firm and transaction levels across many key asset classes were surprisingly resilient. As market sentiment and business activity continue to gain momentum, Asian investors will be on the lookout for opportunities. There is robust demand for logistics assets and we see this momentum remaining strong in 2021, with some clients even willing to bid above asking prices.”
Despite concerns about the outlook for office demand following the relatively successful mass adoption of remote working, the sector continues to attract strong interest from Asian buyers seeking this asset class outside their home region. Sale leaseback deals for large corporate headquarters have been especially popular investments, as have other income producing office properties. US$17.5 billion worth of office deals were concluded by Asian investors in 2020, more than all other sectors combined.