Investors from Southeast Asia are following the lead of their Chinese and Taiwanese counterparts by investing in overseas real estate markets, particularly Europe, according Robert Scholten, the Asia Pacific head of real estate finance for ING Bank.
Scholten said investors from the Philippines, Malaysia, Indonesia and Singapore are beginning to look at assets in Europe and the US as they seek to diversify their portfolios and hunt for higher yields and stable cash flows.
“The trend is accelerating as they start looking at properties in Europe,” said Scholten, adding his clients are looking at countries where they can source projects in transparent and sound regulatory environments.
He said Asian investors – especially those from Singapore – had previously shown great appetite for real estate in Australian cities – particularly Sydney and Melbourne – but were now casting their eyes towards Europe and the US.
ING Bank has been helping Asian investors navigate the European real estate markets, according to Scholten, having completed nearly $3bn worth of commercial real estate transactions in the past year.
This included helping a major Chinese firm acquire retail malls in France and Belgium and helping a Filipino family office acquire a prime office building in Madrid.
In November 2015, the bank helped Filipino businessman Andrew Tan buy a prime Madrid commercial office building Torre Espacio from Spain’s Grupo Villar Mir of international construction group, OHL.
ING Bank was the sole underwriter and lead arranger for the €280m, seven-year loan to finance 50% of the acquisition price.
Scholten hopes to replicate this deal in what could be a beginning of a new trend of Southeast Asian investors making forays into Europe.
Scholten also has one eye Japanese investors beginning to invest in overseas real estate. “The Japanese have a history of buying real estate,” he said, pointing out that “the sheer magnitude of money that could be unleashed when they do start buying could have a major impact on the market.”
Scholten is curious to see whether they would opt for a direct investment strategy – as the majority of investors did in the 1980s and the 1990s – or invest through funds, and funds of funds.
The regional head is also optimistic on the Chinese real estate market, particularly the logistics and warehouse sector, which is benefitting from the transition from an investment and export-led economy to a more consumer-led one.
“From a regional point of view, China continues to be an attractive market,” he said, adding that the Chinese regulatory environment also continues to be relatively hassle-free as compared to that in other developing countries in Asia.
Along with China, other markets on the bank’s priority are Singapore, Australia and Hong Kong, where the bank has both the “risk appetite and the expertise” to add value to its clients.
Yet the story is slightly different in Japan because the dominant position of the domestic banks there put foreign players at a significant disadvantage, he said.