Institutional investors based in Asia could look to invest in excess of
Institutional investors based in Asia could look to invest in excess of US$150 billion in global real estate over the next five years, though not necessarily in domestic markets.
According to the latest research from leading global real estate services provider, CBRE, since there is limited investable stock available in Asia, such investors – including banks, insurance companies as well as organizations managing various types of pooled funds – will likely seek opportunities outside of Asia – in London, New York, Sydney and other gateway cities.
Cash-rich Asian institutional investors currently control a fifth of global institutional capital; however, the current low global interest rate environment and weak stock market performance means they face significant challenges in maintaining adequate returns on their investments.
Many of these investors have begun to recognize the benefits of adding real estate assets to their portfolios, but despite a sharp increase in investment activity in recent years, presently allocate just 1.7% of their assets to real estate, compared to 6-8% among institutional investors in North America and Europe.
The lack of overseas investment experience, regulatory restrictions, limited investable stock and aggressive pricing have posed significant challenges for investors seeking to expand their portfolios within the Asian Pacific region.
This has prompted Asian institutional investors to seek opportunities overseas, with core assets in gateway cities the most sought after asset class. Acquisitions by Asian investors outside the region surged from US$2 billion in 2008 to almost US$9 billion in 2012, with Asian institutions accounting for a large portion of the purchases. Europe is currently the major focus for Asian investors followed by North America and Australia.
As Asian institutional investors diversify into low-risk alternative asset classes, more are expected to increase their allocation to real estate.
Source Institutional Investor