Institutional investors worldwide look set to maintain their allocations to real estate this year, with the Asia Pacific cohort even planning to raise its percentage, according to data compiled by a group of non-profits serving the property investor community.
Investors overall are targeting a 10.4 percent allocation to real estate, a share marginally higher than the current 10.2 percent level, as reported in the 2023 Investment Intentions Survey.
The poll taken by the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV), its European counterpart INREV and pension fund trade group PREA revealed that APAC investors are upping their real estate allocations from the current 6.3 percent to a target of 8.3 percent.
“Investors are also refocusing their investment on fewer geographies in the region with China being excluded,” said Amelie Delaunay, ANREV’s director of research and professional standards. “ESG considerations, including environmentally and/or socially responsible investments and net zero carbon commitments, are now well-established considerations when investing in the Asia Pacific region.”
Sydney and Melbourne beat out Tokyo among the top three investment destinations for institutional investors in Asia Pacific.
Sydney claimed the top spot, with 86 percent of investors planning to assign capital to Australia’s biggest real estate market, followed closely by Melbourne in second place (83 percent) with Tokyo a distant third (66 percent). Outside the top three spots, Seoul replaced Osaka in fourth position, pushing Osaka down to fifth.
Australia also dominated the top three positions for preferred city/sector combination among investors, with Sydney residential at 62 percent, Melbourne residential at 59 percent and Sydney office at 55 percent. Those were followed closely by Tokyo industrial/logistics, Melbourne office and Seoul industrial/logistics in a three-way tie at 52 percent.
Looking beyond Asia, allocations for the other global regions remain relatively flat with a more subdued outlook — especially in Europe, the survey said.
Core Versus Value-Add
Global investors overall favour a core strategy (48 percent) as their preferred investment style for Asia Pacific real estate — the highest level since 2014 — as investors lean towards a defensive stance amid a shift in risk appetite, according to the survey.
Investors based in Asia Pacific, however, are shifting their preference away from core (25 percent) and towards value-added strategy (63 percent), well ahead of opportunistic plays (13 percent).
The Investment Intentions Survey is published once a year in January. This year’s report was based on data from 82 respondents globally (75 institutional investors and seven funds of fund managers from 21 countries) with a combined assets under management of more than $888 billion, ANREV said.