The globalisation of real estate: The view from Asia
There’s been a step change in the globalisation of real estate as an asset class over the past few years – globalising the asset class has become increasingly important. Nick Holt, Knight Frank’s Head of Research in Asia-Pacific, unpacks the extent to which this shift has been seen on the ground in Asia.
3 minutes to read
It's certainly been something that I've witnessed over the last 10 years, throughout the time I've been in Asia, working across various markets. It's come around for various reasons. Going all the way back to the 1980s, the Japanese, for example, went cross-border in some of their investments, and we've seen various waves of that. A lot of Hong Kong investors started coming into China, for example, when the markets started to open up in the late nineties.
However, what we've really seen over these last 10 years is the growth of institutional capital, such as big sovereign wealth funds, the pension groups and the insurance groups, who are allowed to invest overseas if they're sitting on large amounts of capital – in particular, patient capital, otherwise known as long-term investments.
An increase in travel and familiarity with markets outside of Asia has been pushing the outbound wave. And so now, for many groups in a lot of the Asian markets, the idea of investing into further markets around the world is very normal. 10 years ago, it would have perhaps been a giant leap from any of these groups, but it's something we're hearing more and more about. That’s why a report like Active Capital is such a useful tool, not just for our clients in Europe or North America, but for all of our clients here in Asia.
Employing capital overseas in 2021
Most investors are still in a bit of a 'wait and see' holding pattern at the moment, and that's because of Covid-19. They're seeing the crisis and the uncertainty and they're focusing a lot of their time on active management of their assets, looking at occupancy rates and protecting their revenue streams.
Transaction volumes are down compared to last year, which isn’t a real surprise, given the six months we've had. Singaporean investors have been active, both institutional (we've seen GIC have certainly been active in a number of markets around the regions) but also private groups as well, investing beyond Singapore and into Australia, the UK and other markets. We’re also we're seeing a rise in interest in other areas that perhaps were less of an interest just 12 months ago. Within industrial and logistics, for example, we’re seeing a huge amount of capital being raised and deployed in that sector. Obviously, that’s a sector that's proved very resilient and seen growth over the last six months.
Investment opportunities in the coming 12 months
Though it’s a bit obvious, the industrial logistics piece is a big opportunity. Obviously, a lot of capital has already started to gravitate into those markets. But I think another interesting opportunity will continue to be office space. There's been so much talk about the impact of Covid-19 and working from home, so while there’s uncertainty and volatility surrounding that, there are opportunities for resilience, innovation and growth.
So, if you're following the innovation-led cities in our rank, if you’re looking for those cities that are going to continue to see innovation, with white collar employment driving that office demand, we believe there will continue to be opportunities, especially with Grade A office space, in Asia-Pacific, and potentially at a bit of a discount to what you were paying a year ago.
These insights were first explored on September 25th, in the webinar “Commercial Conversations: Active Capital – Your guide to navigating the next investment cycle.” Watch the full discussion now.