Inbound primary investment into real estate in Asia in 2015 is expected to increase by more than three times the rate of the region’s growth in 2014, a white paper by Colliers International has estimated.
Colliers has also predicted inbound primary investment in Asia will far outpace the growth in outbound investment by investors from the region.
Capital flows into Asia, which includes both overseas investments and intra-Asia capital flow, will take a “quantum leap” this year, said Colliers. A narrowing of the gap between the returns generated in Asia, and in the overseas markets, as well as the increase in the availability of quality assets in markets such as Shanghai, Hong Kong and Singapore, have been cited as reasons for such high volumes.
“Inbound investment into real estate in the region will increase by 102 percent this calendar year, as compared to 33 percent in 2014,” said Terence Tang, managing director of capital markets and investment services in Asia for Colliers International. In contrast, outbound investment in real estate is expected to increase by 61 percent, up from the 38 percent increase in 2014.
Direct investment flow into Asia is estimated to increase by 12 percent this year, as compared to the flat growth between 2011 and 2014, led by pro-growth measures in places like India and China.
A recent report from Houlihan Lokey and Mergermarket revealed China and India present the greatest opportunities for secondaries buyers because of changes to the region’s macroeconomy and an influx of primary private equity fundraising.
Greater capital inflow is expected in Asia not just from overseas investors but also Asian institutional investors, who will become more willing to invest in real estate outside their domestic market but within the region, largely due to the greater availability of assets. Intra-Asia flows, according to the report, are expected to increase by 58 percent to reach $62 billion in 2015, a significant jump from the $39 billion invested in 2014.
One of the key factors propelling investors’ demand for overseas real estate is the higher returns available in the European and US markets as compared to the returns generated within Asia.
Recent real estate secondaries deals that have closed in the region include Partners Group’s purchase of 31 limited partner interests in the Trophy Property Development Fund, which is managed by Venator Real Estate Capital Partners.
Still, real estate managers like CBRE said it’s still difficult to close deals in the region. CBRE closed two real estate secondaries deals in Asia last year because a lot of the fund interests are selling at inflated prices as liquidity options have increased. The firm has historically closed between 12 and 15 deals per year in the region.
Reporting by Arshiya Khullar