How is investment appetite in Asia-Pacific changing?

In the first 9 months of this year, we’ve seen APAC capital flowing into both neighbouring markets but also cross continent. In Q1 and Q2 as Asia came out of the initial Covid impact first, there was significant cross border activity with Asia Pacific. The likes of GIC and other government-linked companies were aggressively acquiring in Chinese Mainland, taking advantage of the small window of opportunity there, with a focus on core office assets in major cities.

Similarly, Singapore capital into Australia has remained robust over the year. Overseas investment into Australia was up year on year for the first quarter of 2020, which shows how those safe-haven markets are really attracting the attention of Asian investors at the moment. The UK absolutely falls into that ‘safe-haven’ bracket, with London holding a particular appeal. We’ve particularly seen Singaporean capital, both private and the listed REITs, being active in the UK, especially since July. The strong performance of the S-REITs throughout the year has enabled them to be competitive against other global capital sources.

Clearly, that safe-haven theme is absolutely something we're seeing, though it’s worth noting we were starting to see it pre-Covid, chiefly because of the longer cycle that we're in. Covid-19 has accelerated the trend, as well as other trends, such as the appeal of alternative sectors.

Covid-19’s impact on overseas transactions

Naturally, Covid-19 is influencing the extent to which Asian investors are able to transact overseas. Travel is beginning to open up within the APAC region, with green lanes agreed between Singapore and Japan, Malaysia, South Korea and Hong Kong, SAR, but still with restrictions in place. It is likely to be some time before travel is allowed to Europe, therefore investors are having to be inventive and flexible about the way they transact. Capital partnering with local groups on the ground is really coming to the forefront.

It’s becoming evident that Asian investors that have bases in country, such as in the UK or Australia, are at an advantage, being able to inspect and transact through their local teams. However, we have seen examples of Asian investors completing on core assets without having seen them. This really shows that high quality buildings and long income streams are going to be at the top of the target list, because these very passive investments might not require investors to travel in order to transact.

These insights were first explored on October 2nd, in the webinar “Commercial Conversations – Active Capital – Capital Gravity.” Watch the full discussion now.