Australia ranked No 2 among cross border investors in Asia Pacific
Australia ranked No 2 among cross border investors in Asia Pacific
18 March 2014
Sydney, 18 March
2014 –Australia has been ranked as the
second most attractive country behind China for cross border investment
according to CBRE’s Asia Pacific Investor Intentions Survey 2014.
survey gauged the appetite and outlook of Asia Pacific real estate investors
for the rest of the year. It showed that a significant majority of investors
expected to commit more capital to the Asia Pacific real estate market in 2014
compared to 2013.
real estate investment turnover in Asia Pacific for 2013 reached US$90.4
billion, a rise of 24% year-on-year and the highest figure recorded since CBRE
began collecting data in 2005. Despite the record total reached last year, and
various concerns ranging from high pricing to slower economic growth, a
majority of respondents indicated that they will continue to commit more
capital to the Asia Pacific real estate market, with 64% expecting their
purchasing activity to be higher than in 2013.
were not without concerns, however. Respondents identified economic slowdown or
weakness as the biggest concern around property investing in 2014 (23%), along
with the perception that property has become overpriced (21%) and the effects
of US tapering and rising interest rates (17%).
some obstacles and threats, investors generally retained a positive outlook
towards the Asia Pacific region’s longer term prospects. Investors are not just
planning to commit more capital to the region, they are looking to commit
substantially more. The attractiveness of Asia Pacific as a region persists as
a result of economic growth levels that remain higher than global averages,
long-term demand for quality commercial property and rapid urbanization,” said
Greg Penn, Managing Director, Capital Markets Asia for CBRE.
Australian Head of Research Stephen McNabb said the inaugural survey
highlighted a number of key messages for the Australian market.
inconsistent with our current read on the market, the results show that
Australia still ranks highly in terms of cross border investment
attractiveness,” Mr McNabb said.
ranks No. 2 (identified by 18% of cross border investors) after China (28%) as
the most attractive country for property investment, with Sydney and Melbourne
ranking 3rd and 4th respectively in relation to city investor preference, after
Tokyo and Shanghai.”
Australia ranked number one on actual investment last year accounting for 35%
of cross border investment. Mr McNabb said this suggested that foreign capital
inflows to the Australian market could slow in 2014 as we began to compete with
China and other growth regions for global capital.
expect a slowing - not an exodus - in capital inflows. This is consistent with
our view that demand for AUD assets falls relative to improving growth stories
globally, the outcome of which has been reflected in a lower AUD over the past
six months of so,” Mr McNabb said.
Senior Director, International Investments, Michael Andrew said there were also
signs that investor interest was broadening to secondary markets outside the
is still witnessing very strong demand for core real estate across all sectors,
however we have seen the emergence of an appetite for assets in what has often
been seen as secondary “non-core” markets, where investors understand they can
still get high quality assets, strong covenants and at better yields than in
the CBD’s,” Mr Andrews said.
survey also highlights that investors are demonstrating a shift in preference
to industrial assets regionally with industrial/logistics investment seeing
some up-weighting in portfolio allocation compared to the office sector.
the Australian industrial and logistics sector was identified as the most
attractive country-based sector for investment, ahead of Australia offices,
China industrial & logistics and Japan offices.
is consistent with our local expectations that the cyclical economic recovery
will assist industrial assets which are starting with a higher yield and
potential for an improved rent trajectory compared to office assets in the
short term,” Mr McNabb said.
Regional Director, Industrial & Logistics Services, Matt Haddon added that the
heightened interest was already translating to increased buyer activity with
$4.5 billion to $5 billion in Australian industrial investments expected to
change hands this year. This was up from circa $3 billion in 2013 and the
highest level of activity since 2006.
have the confidence to sell into this market knowing that yields are
tightening, so the availability of premium logistics assets is there to meet
the demand from local and offshore investors,” Mr Haddon said.
survey also highlighted an improved appetite for secondary assets across the
we expect this to support previously underperforming classes of assets in the
retail and industrial sectors. This includes large format retail;
sub-regional/neighbourhood shopping centre and some secondary industrial
assets, particularly given the vacancy risks in the office sector,” Mr McNabb
in APAC is the Most Attractive for Property Investment in 2014?
retained a lot of appeal for investors, with Emerging Asia and Developed Asia
topping the list of preferred regions to invest in globally, with 23% of
investors saying they targeted each. There was also strong interest in
investing in North America and Western Europe as the recovery in the West takes
hold, with 20% and 16% of investors interested in these markets, respectively.
office sector was identified as the most popular sector for investment (32%)
followed by industrial and logistics (29%) and residential (21%).
interest in retail assets cooled somewhat from previous years in part because
of the challenges of sourcing investable assets, and pricing.
survey also revealed a number of other interesting trends, including:
• Respondents continued displaying a
strong preference towards investing in gateway cities such as Sydney, Tokyo and
• Investors are polarized at both ends
of the risk curve; some indicated that opportunistic/value-added is their
preferred asset type; others are looking at prime/core whilst relatively fewer opted
for secondary assets
• Investor appetite for secondary assets
is increasing, however, as buyers are deterred by the aggressive pricing for
prime/core assets and look to capitalize on the pricing gap between core and
the current hard pricing for core assets, core fund returns have shrunk
significantly. This is making value-added and opportunistic strategies more
appealing to investors. That said, the appetite for prime or core assets
remains strong from Asian institutional investors whose portfolios are
seriously underweight on property,” said Ada Choi, Director, CBRE Research
fewer respondents (21%) prefer good secondary assets, and as a result the
pricing gap for good secondary locations and assets is wide, and is becoming
in secondary assets may consider taking on some leasing risk in the early
stages of the recovery cycle as rental growth begins to pick up in a number of
key markets. Given the low yield environment and chronic shortage of core
assets in Asia, investors are showing a preference for riskier investments and
are looking for value-added opportunities. This trend partly explains why a
larger percentage of funds recently raised were focused on opportunistic
strategies,” said Ms Choi.
CBRE Asia Pacific Investor Intentions Survey 2014 was carried out online
between January-February 2014 and covered a wide range of real estate
investors, in particular including fund or asset managers, but also others
including private equity firms, banks, insurers, private property companies and
REITs. Respondents were primarily comprised of Asia Pacific-domiciled
investors, but global investors headquartered elsewhere, but with the ability
to invest in Asia Pacific, were also included.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue). The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website atwww.cbre.com.au.