National CRE News In Your Inbox.
Sign up for Connect emails to stay informed with CRE stories that are 150 words or less.
Asia Pacific’s Biggest Cross-Border Investors Emerge
The biggest exporters of Asia Pacific capital in 2018 were South Korean and Singaporean investors. New research by Real Capital Analytics (RCA) show South Koreans are starting to exert some muscle on a global scale, though Singaporean groups continue to play a dominant global investment hand that’s spanned more than two decades.
Singapore’s cross-border investors were the largest exporter of capital from Asia in absolute dollar terms and have deployed capital diversely, writes RCA’s Petra Blazkova. In 2018, they bought $24.7 billion in income-producing assets in a variety of asset classes, including office and retail, as well as logistics and alternative asset classes such as student housing and manufactured homes.
South Koreans, which tended to focus on core real estate sectors, with a large allocation to CBD offices, invested $8.4 billion in 2018. More than 76% of that total went towards Europe, though other targets included the U.K. and Germany, and to a lesser extent Belgium and France. Blazkova writes, “The opportunities in liquid, deep markets combined with attractive long-term income streams is what appeals to them.”
The common denominator driving activity by the two investment powerhouses, notes Blazkova, is their countries’ large savings rates. Singapore had an average savings rate of 47% of GDP over the last decade, and roughly half gets invested through government sponsored entities. In South Korea, the situation is similar. Its large inflows of compulsory pension and insurance contributions need to be invested to match future liabilities.
But, the international exposure comes at a price, points out Blazkova, who writes “they outbid both domestic and other foreign investors.” For instance, the average office yield that South Korean and Singaporean investors paid in Europe in 2018 was 50 basis points below other cross-border player,s and another 35 basis points below the domestic groups.
Blazkova predicts investors from both Singapore and South Korea will continue to explore new opportunities to export capital, given the relatively small size of their domestic markets. That may lead to new investment strategies to deploy capital efficiently, given rising global prices and a competitive environment.
For comments, questions or concerns, please contact Dennis Kaiser
- ◦Sale/Acquisition
