APAC institutions tipped to double global real estate investment

Asia Pacific institutional investors are expected to invest $240bn (€224bn) in global property markets by 2020.

CBRE said it expected overall allocations to global real estate to increase to $500bn over the next four years, nearly double the $260bn invested by the end of last year.

Asia Pacific institutions – which include sovereign wealth funds, pension funds and insurance companies – are cash-rich, CBRE said in its report ‘Will New Sources of Capital Extend the Cycle?’.

As of the end of 2014, the investors were sitting on a combined war chest of nearly $15trn, representing approximately 25% of total global assets under management, according to CBRE.

Marc Giuffrida, executive director at CBRE Global Capital Markets, said Asian institutional investors have real estate allocations of around 2% – more than three years ago but still “considerably below” their own internal targets and much less than OECD peers, which sit at 5-7%.

“This allocation gap,” he said, “combined with real estate’s attractive risk-adjusted returns, is why we are seeing an acceleration of investment plans by institutional investors – not just globally but regionally as well.”

Five of the top 10 global sovereign wealth and pension funds are from the Asia Pacific.

CBRE recorded $20bn in total direct commercial property investments by Asia Pacific institutional investors in 2014 and nearly $10bn in the first half of this year.

The proportion of total investments made overseas by APAC institutions has also risen, from just 37% in 2011 to more than 80% of total purchases in 2014.

Investors’ portfolios are still significantly underweight, CBRE said, with growing interest among APAC institutions in real estate funds. 

New entrants are by and large Chinese and Taiwanese insurance companies that have made their first overseas property acquisitions in recent years.

“We are seeing the expansion of the investment landscape,” Giuffrida said.

“The new wave of investors have quickly learned from their established peers and are becoming more dynamic in their approach.

“They are recruiting top talent at both market and decision-making level and increasing their in-country presence via new offices, joint ventures or partnerships.”