Private investors dominate APAC commercial real estate investment
Private investors drive APAC's commercial real estate growth, with 32% of high-net-worth-individuals planning increased investment.
3 minutes to read
Private investors were the most active buyers in global commercial real estate investment in 2022, accounting for 41% of the total investment.
Multifamily residential – or private rented sector – was the investment of choice, followed by offices and industrial and logistics combined.
Asia-Pacific’s (APAC) High Net Worth Individuals (HNWIs) allocation to commercial investment increased over 30% year-on-year (YoY) in 2022, accounting for over US$1.53 billion in commercial property investment – a significant uptick amidst a broader decline in investment volumes across the APAC region, which decreased by 21.3% in 2022.
Where is investment going?
Investors from the US are forecast to be the most active, accounting for roughly half of all global private cross-border capital into commercial real estate in 2023. Likely targets include offices in the UK, Japan and Singapore, as well as industrial assets in Germany, Japan and South Korea.
Private investors from Singapore, Germany, the UK and Canada are also expected to be active this year. HNWI capital from Brazil, the US, UAE, Germany, Spain, and Switzerland is forecast to be prominent in 2023, with offices and retail in the UK a particular focus.
Neil Brookes, global head of Capital Markets at Knight Frank, shares: "The ongoing repricing of assets and the stronger currency positions have allowed private investors to continue their dominance in the market. With debt set to be a key factor for all investors in the year ahead, private clients are well-positioned to take advantage of opportunities as they are typically less reliant on debt with ample cash reserves to secure prime assets quickly.”
Christine Li, head of research, Asia-Pacific at Knight Frank, says: "The inflation pressures in APAC remain more moderate compared to global markets, as most central banks in the region have pursued prudent monetary policies and maintained fiscal discipline. In addition, the expectation that APAC will lead the economic growth in 2023, has resulted in a more nuanced landscape emerging in this region.”
Real estate investment
Despite the expected persistence of macroeconomic challenges in many global locations, Knight Frank's High-Net-Worth (HNW) Pulse Survey, encapsulating the views of 500 HNWIs across 10 countries and territories, indicates that property holdings are likely to increase. 19% of HNWIs intend to invest directly in commercial property, with 13% set to take the indirect route. Healthcare-related assets topped the wish list for HNWIs in 2023 (35%).
In terms of how much HNWIs are considering investing in commercial property, 54% of global respondents are seeking opportunities under US$1 million (stands at 55% for APAC HNWIs).
However, 11% of respondents are looking to complete a transaction of US$20 million or more (stands at 13% for APAC, highest among other regions such as Europe and the Americas).
While APAC HNWIs responded similarly to their global peers in the aforementioned questions, they are more optimistic about commercial property investment than their global peers.
Our research shows 32% of APAC HNWIs plan to increase allocations to commercial property (global average is 28%)
Although inflation will be a significant factor influencing investment decisions in 2023, 26% of APAC HNWIs responded that it will not influence their investment decisions at all (global average is 20%)
The survey reveals that 43% of APAC HNWIs indicated that capital appreciation is their biggest goal for wealth in 2023 (global average is 31%)
Daniel Ding, head of Capital Markets (Land & Building, International Real Estate), adds, "Office and hospitality remain popular asset classes in Singapore. However, rising interest rates may cause institutional funds to adopt a wait-and-see approach, creating opportunities for private capital to increase their activity in commercial real estate investments."
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