New sources of Asia outbound capital emerge in Europe
In 2019, Asian outbound commercial real estate investment fell 17% y-o-y to US $45 billion, according to the latest Asia Pacific Viewpoint report by CBRE Research. The perpetuation of capital controls in Mainland China was the primary reason for the moderation in investment activity, however, the appetite for overseas real estate acquisitions by other countries in the region remained robust.
Investment momentum in 2019 was largely propelled by Korean investors, whose full-year investment volume grew by 66% to US $12.5 billion. Nearly 70% of total Korean capital was invested in European markets, as buyers capitalized on low financing costs and the hedging premium between the Won and Euro.
Portfolio diversification stimulated investors from Korea, Hong Kong and Singapore to inject significant capital into Europe, of which US $4.9 billion of deals was recorded in Paris alone. Investors from Asia also led a pronounced shift toward other European cities, including Dublin, Milan, Prague and Warsaw. In contrast, interest in London, which was the most popular destination for Asian outbound capital in 2018, weakened amid ongoing political uncertainty and limited availability of stock for sale.
Investors from Hong Kong and Singapore are expected to continue paying close attention to European markets throughout 2020. The easing of geopolitical uncertainties post-Brexit are also expected to reignite investors’ interest in London in 2020.
In 2020, we expect commercial real estate investors in Asia to continue seeking portfolio diversification opportunities outside of their domestic markets. As the upward market cycle reaches maturity, it is projected that investors in the region will turn to assets with stable income streams.