Chinese capital dominates Asian outbound real estate investment in 2016 : CBRE
Asian outbound real estate investment was dominated by Chinese investors in 2016, accounting for almost half – 47% or US$28.2 billion – of the total capital transacted during the period.
CBRE Institutional & International Investments NSW Director Michael Andrews said while Australian remained highly sought after by mainland Chinese capital, demand from other Asia markets was also strengthening.
“Chinese investors remain active in deploying capital offshore into the Australian market, with the majority of this targeting residential development sites and/or income producing assets that are capable of being converted to residential,” Mr Andrews said.
“Offshore capital flows continue to strengthen in the Australian market, with new and increasing mandates from existing investors and also emerging capital from markets such as Japan that we haven’t seen for some time.”
While office assets in the core Sydney and Melbourne CBD markets remain strongly sought after, there is also an emerging shift in sentiment towards emerging secondary markets in these locations.
“There is a very strong appetite from global capital for quality office investments. The change we are seeing however is in their growing acceptance of markets outside of the CBD core – such as North Sydney, Parramatta and Macquarie Park in New South Wales, and St Kilda Road in Melbourne,” Mr Andrews explained.
For the second consecutive year, CBRE figures reveal that the US remained the most favored destination for Asian capital, drawing 43% of the overall total, followed by EMEA as the second-favored at 27%.
Pacific attracted 7% – or $4.4 billion – of the overall investment turnover, with 53% of this injected into the Sydney market.
New York surpassed London as the top metropolitan destination for outbound investment in 2016, however, it contributed to a smaller share compared to 2015. The total top five destinations — New York, London, Hong Kong, Seoul and Sydney — contributed to 37% of the overall total, a decrease from 42% y-o-y, revealing that investment was spread across more diverse destinations.
Mr Andrews said Asian investors were seeking out assets in more diverse markets, with greater demand emerging for more niche opportunities.
“The shift towards counter cyclical investment is gaining some momentum, with Asian investors showing more willingness to invest in secondary locations in addition to alternative sectors outside of the traditional office assets – such as student housing and healthcare,” Mr Andrews added.
CBRE Global Capital Markets Executive Director, Yvonne Siew, said outbound investment activity by Asian investors remained robust, with institutional investors continuing to lead investment activity, contributing to six of the top ten biggest outbound deals of the year.
“Despite recent policies by the government restricting Chinese outbound investment, there continues to be a steady flow of Chinese capital overseas as investors seek to diversify their portfolios,” Ms Siew said.
“With more scrutiny on cross-border capital flows and rigorous checks by the government which may lengthen the approval process, Chinese outbound real estate investment may moderate, gathering at a more sustainable rate. Instead of larger transactions, Chinese investors may simply opt for a higher number of smaller deals. Regardless, Chinese appetite for global real estate investment will remain solid but more cautious, with Chinese insurers and qualified Asset Managers being the active institutional investor class,” added Ms Siew.