Global money managers are bullish on Asia Pacific real estate as they develop a keener appetite for risk, according to a new survey which finds that 77.5 percent of institutional investors plan to boost their allocation to the region’s property assets in 2020.
The joint survey by ANREV (Asian Association for Investors in Non-Listed Real Estate Vehicles), its European counterpart INREV, and PREA (Pension Real Estate Association) reveals that only 6.7 percent of institutional investors expect their allocations to Asia Pacific to decrease.
Survey respondents have plans to deploy a total of $101.3 billion of new capital worldwide in 2020, of which 31.9 percent is expected to be placed in Asia Pacific markets—jumping from 19.6 percent the previous year. As in last year’s survey, global investors noted that they see value-add investments in the region as offering the best risk-adjusted returns.
A greater number of investors than last year—21.3 percent compared to 18.0 percent in 2019—said they prefer the opportunistic investment style in the region, but core investment remained the most popular model at 47.8 percent.
Investors from the region are also raising their profile. Asia Pacific-based players are expected to account for 83.5 percent of investment in the region, a huge increase from last year’s figure of 52.4 percent.
Australia Remains Top Choice
“Despite slowing returns, real estate is set to continue to attract new capital in 2020, especially in Asia Pacific where a lot of investors are still building their portfolios and looking to achieve further diversification,” commented Amélie Delauney, director of research and professional standards at ANREV in a statement.
The enthusiasm for Asia comes after investors racked up a record $128 billion in commercial property deals in the region during the first three quarters of 2019, according to a report last year by JLL. Transaction volume in Asia Pacific jumped 10 percent year-on-year, outperforming other global regions.
ANREV’s latest survey of institutional investors and funds of funds managers shows that Australia continues to dominate the ranking of preferred destinations in Asia Pacific, with Sydney and Melbourne chosen as the top two markets for the last four years in a row. Tokyo and Osaka rank third and fourth, respectively.
As an example of the buoyant interest Down Under, Singapore-based SC Capital Partners teamed up with Australia’s Fortius Management to buy three Sydney shopping centres for A$174.5 million ($118 million) last October. The private equity firm followed up that deal a month later by agreeing to buy a former police complex in Melbourne for A$107 million ($73 million), with plans to reposition the property for commercial office use.
Japanese Apartments Draw More Interest
Office remains the most desired asset class for investors in Asia Pacific, followed by industrial and logistics, then residential, according to the ANREV survey. Tokyo residential ranked among the top three city/sector combinations for the first time, underscoring recent investments in the city’s apartments.
Allianz Real Estate ventured into the Japanese residential market last October by agreeing to buy a portfolio of 82 multifamily assets in the country from Blackstone for €1.1 billion ($1.2 billion). The deal marked the first direct multifamily investment in Asia by the property arm of the European insurer.
And just this week, London-based Nuveen Real Estate announced that it had partnered with Japanese asset manager Kenedix to purchase seven Tokyo apartment blocks for $224 million.
Institutional investors around the world dedicate an average of 10.4 percent of their portfolios to real estate, below the target allocation of 11.4 percent, the ANREV study found. Allocations are rising, with 63.6 percent of survey respondents planning to ramp up their real estate exposure over the next two years.