GLOBAL - Investors will take refuge in Asian markets from "considerably riskier" developed markets such as London, according to RREEF Germany managing director Clemens Schaefer.

Schaefer, who is responsible for managing spezialfond portfolios collectively worth €2.5bn, told IPE Real Estate investors looking to Asia for higher risk-adjusted returns were now focusing on diversification benefits rather than risk premiums.

"More people are reasoning that many Asian markets are beyond emerging," he said.

"It would be hard to find a more volatile market than London, which first fell 40%, then rose 30%.  

"Increasingly, many investors see some Asian markets as considerably less risky."

His comments came as RREEF Spezial Invest, the investment manager's German subsidiary, announced it had reached its €500m acquisition target for 2010. 

Of the 20 assets worth €528.3m acquired on behalf of institutional investors, the largest was the €100m Prime Towers office building in Seoul, South Korea.

Like the other assets, Prime Towers - a prime, albeit not new, asset - is fully let on long-term lease agreements.

Schaefer cited forecast GDP growth of 2-3% and Korea's smooth economic emergence from the financial crisis as drivers for investment in the capital.

"The banking system proved robust, with no major defaults," he said.

"At the same time, there is strong population growth that provides sponsor demand and stabilises GDP."

Korea's office rental market - in contrast to the Singapore, Hong Kong and Tokyo markets, which reached double-digit annual growth- peaked at 5%.

"It stopped for a year, now it's picking up again - but it never overheated," he said.

"Seoul is one of the largest metropolitan areas in the world, so the prospects for rental growth and land appreciation are good."

Meanwhile, the Japanese market is seeing a substantial correction in pricing, with significant in-place rental adjustments in a lettings market characterised by average lease lengths of two to three years.

Despite slow deal flow market-wide and a disproportionately high volume of related-party transactions, Schaefer said RREEF had identified "selective opportunities".

RREEF plans to invest a further €300m before the end of 2010, including Asian markets.

The manager has not ruled out investing in southern European markets, including Spain and Italy, because "disruptions" in those markets can selectively offer good value and less competition.

Three of the assets announced last week are in Spain; one is in Italy.

However, former Yugoslavia, Greece, and "further east than Poland" remain off-limits because they "lack the required transparency and the necessary size to be relevant investment markets in Europe", Schaefer said.

 

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