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Where global investors are setting up new offices

Investors are opening fresh real estate operations across Asia Pacific in a bid for resilience

Oktober 29, 2021

Canadian, European and U.S. investors are opening and expanding offices in Asia Pacific in search of diversification, yield and growth in the aftermath of the COVID-19 pandemic.

Among those establishing new outposts is Cadillac Fairview, wholly owned by Canada’s Ontario Teachers’ Pension Plan, which is opening an office in Singapore at the end of 2021. U.S. investor Hines has also been expanding into the city state.

Canadian firm Ivanhoe Cambridge is setting up in Australia next year, while Germany’s Patrizia has recently announced plans to expand into Japan.

Transaction volumes have been increasing in APAC for years. But the new office openings come amid rising prices and declining yields for high-quality real estate around the world since the pandemic, prompting a gear-change for investors.

“Investors are gearing their portfolios more towards resilience, which is driving them to diversify geographically and across property type,” says Singapore-based Kate Low, senior director in international capital – Australia, JLL. “With increasing pent-up capital, investors recognise the opportunity for compelling returns and acknowledge the demographic drivers of APAC.”

Although Asia Pacific cross-border activity is yet to reach pre-COVID-19 levels due to travel restrictions, there are signs of recovery. In the third quarter of this year, investments in APAC reached US$125 billion, just 6 percent below 2019 levels and 30% up year on year, according to JLL. The firm forecasts deal volumes to rise up to 15 - 20 percent by the end of the year. 

At the same time, 87 percent of institutional investors from Europe and 65 percent from North America expect to increase their allocation to APAC over the next two years, according to JLL.

Among those is Allianz, one of many overseas groups which have been established in Singapore for several years with the aim of being closer to deals. The group plans to increase its assets under management in APAC to 15 percent over the coming years from 9.6 percent.

Singapore’s business and expat-friendly regulatory framework, along with its political stability, make it a preferred base for global investors and ideal gateway to APAC markets. The city-state was also ranked the safest place in Asia in Bloomberg’s COVID-19 resilience ranking in August 2021.

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APAC investments

Singapore, Japan and Australia have consistently ranked as the most popular investment destinations within APAC, according to JLL data. But there is also significant demand for South Korea and China as investors seek out liquid markets with deep domestic demand, limited geopolitical risk and favourable cash-on-cash returns.

“Asia Pacific has a strong underlying economic growth of over 5 percent, which is higher than Europe and the Americas,” says Regina Lim, JLL’s head of capital markets research in the region. “It has a young, tech-savvy population, providing lots of opportunities to build more modern logistics stock, more data centres and more innovative retail.”

The hunt for resilient, income-producing assets means offices accounted for the majority of deals across the region in the third quarter of this year at 55 percent, according to JLL’s latest APAC capital tracker. The next highest was logistics and industrial real estate at 24 percent.

Meanwhile, Japan continues to be the target market for multi-family deals, with M&G, LaSalle, PGIM, Allianz, Nuveen and AEW all adding this to their portfolios this year.

Australia is also firmly in the frame. U.S. investor Greystar’s new Australian build-to-rent fund accumulated A$370 million (US$265.5 million) in its first round of capital raising earlier this year.

Australia is the only country within APAC where investment volumes have exceeded pre-COVID-19 levels. At US$20 billion, deal flows in the first nine months of this year already match the 2019 total. Experts owe this to Australia’s transparent market and strong pool of domestic investors, including well-capitalised superannuation funds.

A recently-announced travel bubble with Singapore for business purposes, along with a broader easing of international travel restrictions towards the end of 2021, is expected to increase deal flow even further.

One of the first groups taking advantage is Singapore’s GIC, which is among the world’s biggest sovereign wealth funds, due to open an office in Australia in 2022. The move comes on the back of its A$3.8 billion (US$2.72bn) joint venture purchase with ESR of Blackstone’s Milestone logistics portfolio in June this year – Australia’s largest ever portfolio deal.

“As soon as international borders open, we expect to see an influx of offshore capital desperate to make a trip to Australia,” says Fergal Harris, JLL’s head of capital markets, Australia. “Dry powder has rebounded to a new record in the first half of this year with only 7.5 percent of APAC real estate funds allocated out of a targeted 11.5 percent. We can’t underestimate the value of physical inspections for key groups even though a majority have been bidding site-unseen.” 

Kontaktieren Fergal Harris

Head of capital markets – Australia, JLL.

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