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The Rise of Asian Capital

  • Share of regional cross-border investment within Asia Pacific reached a 6-year high at 18% in Q3 2023
  • Mainland China investors dominated local CRE market activity in Q3 to take an all-time high of 96% of total quarterly investment volume

HONG KONG SAR – 7 December 2023 – Asia-based capital continued to dominate the commercial real estate (CRE) investment market in Asia Pacific this year, according to Cushman & Wakefield subject matter experts speaking at the MIPIM Asia Summit held in Hong Kong from December 5 to December 6.

Gordon Marsden, Head of Capital Markets, Asia Pacific, Cushman & Wakefield, said during a panel discussion on Inbound Investment, “While global investors from outside the Asia Pacific region and managers managing global capital are generally well placed with significant dry powder for deployment, they have recently moderated their pace of investment and become more selective in markets and sectors. This has provided a window of opportunity for Asia-based investors to expand their regional footprint. While Singapore and Hong Kong capital remained the largest sources of intra-regional investment, we have seen a significant increase in Japanese outbound investment in Asia Pacific — reaching a record high this year to become the third largest source of capital within Asia. Japan’s low-rate environment has encouraged the country’s investors to seek opportunities with higher yield returns elsewhere in the region.”

According to the latest data from MSCI, share of regional cross-border investment within Asia Pacific reached a 6-year high at 18% in Q3 2023. The rise was primarily driven by a spike in Japanese outbound investment, reaching US$2.8 billion for the year-to-date as of November 2023, more than three times the previous 10-year average of US$0.8 billion. On the other hand, domestic investment activity levels remained relatively steady in Q3 to account for 73% of the quarter’s total transaction volume.

Marsden added, “We believe in the long-term advantages that Asia Pacific offers to global investors, in terms of both strong economic and demographic fundamentals, as well as the diversification of investment products ranging from development projects in growth markets to core assets in mature markets. This will stimulate more activity as we move through 2024 as rates stabilize and asset prices normalize.”

Francis Li, International Director, Head of Capital Markets, Greater China at Cushman & Wakefield, added, “We have observed a similar trend in mainland China this year, with domestic capital dominating the China CRE investment market, accounting for 87% of the total transaction volume over the first three quarters, and an all-time high of 96% in the third quarter. Large institutional investors comprising insurance companies, onshore PEREs, and banks and trusts’ investment arms; government platforms and SOEs; and end-user buyers particularly from the energy, finance and TMT sectors, are currently the largest investors in mainland China.”

Li concluded, “A growing number of domestic investors have increased their allocation in commercial real estate assets, especially in Tier 1 cities, seeking stable long-term returns. We expect this trend to continue in 2024 given the relatively low-rate environment for domestic capital and recent expansion of C-REITs to include retail properties, in addition to industrial, logistics and R&D assets.”