Inbound Investment Into Asian Real Estate Set to Double in 2015

HONG KONG, CHINA--(Marketwired - March 25, 2015) - While the flow of outbound capital from Asia will accelerate this year, it is inbound capital that will take a "quantum leap" in 2015, according to a new white paper from Colliers International.

"Inbound investment into real estate in the region will increase by 102% this calendar year", Terence Tang, Managing Director of Capital Markets & Investment Services, Asia, predicts, "more than three times the rate of growth in 2014. The office market Asia-wide is at a stage in the cycle where new supply will rise 152% to about 100 million square feet, presenting significantly more opportunities. Shanghai, Hong Kong and Singapore remain the best target destinations, but structural change in markets such as India is making them more attractive."

Outbound flows into real estate will increase 61% in 2015 from a record US$46 billion last year, Colliers predicts, thanks to continued appetite from traditional investors and relaxation measures on the policy front. For instance, China has streamlined the approval process for mainland companies that are investing outside the mainland. In Japan, the US$1.1 trillion Government Pension Investment Fund is considering allocating 3 to 5% of funds to global real estate, which would make it the world's largest real-estate allocation.

In terms of volume, mainland China (31.0%), Singapore (27.2%) and Hong Kong (12.9%) have been the top three sources of outbound real estate capital, accounting for 71.1% of the total outbound capital the region invested in 2014.

"Prime gateway cities such as New York, London, Sydney and Melbourne continue to be the preferred destinations for outbound Asian investors. But with existing income-producing assets being gradually snapped up and increased competition from local players, some overseas investors are turning to fringe locations in those markets where better returns are available," Simon Lo, Executive Director of Asia Research and Advisory comments.

The Colliers capital-markets team, in its investor white paper "The Winners in Asia's Tug of War," notes that the secondary locations of gateway cities such as Los Angeles and Frankfurt offer the prospect of better returns, albeit with marginally more risk. That should encourage investors to expand their focus beyond New York and London, the perennial favourites in North America and Europe.