Asian investment in European real estate funds is set to grow massively in the next few years, according to Rob Wilkinson, the incoming CEO of AEW Europe.
Asian investment in European real estate funds is set to grow massively in the next few years, according to Rob Wilkinson, the incoming CEO of AEW Europe.
Up to now, most of the sovereign and institutional capital coming out of Asia has followed the direct real estate route, either through a third-party investor or via a joint venture, he pointed out in an interview with PropertyEU. ‘So far we have seen limited activity in funds, but this is just the tip of the iceberg - we’re only at the beginning of what we will see in the fund sector in the next 5, 10, 15 and 20 years.'
With target allocations of 5% to real estate, a huge amount is still to come, he added. 'These are massive quanta and it will be a huge challenge to find ways to deploy this capital and structure these investments. We now have a limited pool of fund vehicles but there is an international trend towards more structured investment. We're already seeing it in the logistics space in Asia.’
A decade ago, European investment managers were raising money for investment in emerging markets in Asia, but that trend is now reversing, Terence Tang, managing director of Colliers International in Singapore, agreed. 'Most Asian investors feel more comfortable with direct investment and fund management is still very new. Twenty years ago, there were no real estate funds at all in Asia. But now we’re seeing funds being raised in Asia to invest in Europe and the US. I think we will see more investors go through the indirect route in the next five years, this trend will continue to grow.'
While the UK and Germany are the primary targets of Asian investors, France is another market they would like to invest in, Wilkinson said. ‘We’re already seeing some activity from Asian investors in Central and Eastern Europe, and they will also move to Spain and the Nordics in the next 12-24 months. We're seeing a fundamental shift in the number of investors deploying capital in regions other than Asia. Asian capital will be significant in the coming years, the number of investors from the US and Middle East will be too. The number of investors we’re seeing now we’ve never seen before in Europe. That will be a dominant feature in the years ahead.'
In the coming years, Taiwanese investors are expected to increase their presence in the UK and Europe while the Japanese are also on course for a comeback after an extended absence as are Australian superannuation funds.
Wilkinson believes that the majority of Australian, but also US investors will enter Europe through fund structures rather than the direct route. 'The Australians were fairly badly burned in the last cycle, but they will be back,' he predicted. Having said that, the largest of the superannuation funds looking for core exposure will likely revert to the direct route, he added.