October 30, 2024

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Korean investors were the largest source of Asian outbound flows in commercial real estate investment in the first half of 2019, offsetting Chinese investors’ portfolio rebalancing, data showed on Sept. 9.

Their overseas transactions came to $6.8 billion in the first half, according to real estate service firm CBRE. The figure has doubled over the course of two years.

The graphic above as of August 2019 shows the volume of Asian cross-border investment by source of capital in the first half of 2019. Transactions include deals in the office, retail, mixed, industrial, hotel, restaurant and other commerical sectors. Development sites and global logistics properties privatization deals are excluded. CBRE Research

Of the total, $4.8 billion went to countries in Europe, the Middle East and Africa, taking up 67 percent of the entire Asian cross-border investments targeting the European market.

The capital of Korean asset management firms and securities companies ranged from office buildings in major gateway cities like Paris and Amsterdam to cities of smaller markets like Ireland, Poland and Czech Republic to seek higher cash returns.

They are in search of diversification, a low interest rate environment, historically low yields and new destinations are gaining popularity, CBRE said.

“Low domestic yields and a positive hedging environment were identified as key motivators for Korean investors,” said Henry Chin, head of research covering Asia-Pacific, Europe, the Middle East and Africa in CBRE.

Alongside Korea, Singaporean investors were also showing an increase in cross-border real estate investments in the first half.

Singaporean buyers accounted for 43 percent of total outbound investments within Asia, and 51 percent of the real estate market in the Pacific area.

Singaporean investors were “largely motivated by yields and are more willing to move out on the risk curve and explore alternative property investment options,” Chin added.

These come in contrast to a 25 percent drop on-year to $19 billion in total Asian outbound real estate investment in the first half.

Chinese investors have disposed of assets in key overseas markets including London, New York and Vancouver recently, and shifted from net buyers to net sellers since the second half of 2018.

“While the purchasing momentum by mainland Chinese investors has faded, different Asian investors will continue to seek portfolio diversification and new markets, as well as new routes into the real estate sector will, to an extent, fill this gap,” said Sean Choi, head of Capital Markets at CBRE Korea.

By Son Ji-hyoung (consnow@heraldcorp.com)