San Diego CA— In a departure from the historic trend, the U.S. is now the top destination for Asian outbound commercial real estate investment, according to the latest research from CBRE.
Asian cross-border commercial real estate investment surged in the first quarter of 2015 reaching US$8.6 billion. This constitutes the strongest recorded Q1 outbound performance since major Asian outflows began in 2013, driven by growth in institutional capital flows.
U.S. investment volume reached US$3.3 billion, ahead of Europe at US$2.5 billion. This volume includes investment in existing portfolios only, while, beyond that, Asian buyers invested at least $600 million in development sites in the Americas region in Q1 2015.
Russell Ingrum, Vice Chairman, CBRE Capital Markets, commented “The U.S. firmed as a favorite investment destination for Asian investors, weighted with the closing of some high profile trophy deals. Asian investors are also seeking assets across the size, quality and risk spectrum. We saw strong demand from Chinese-based developers in the lower price brackets particularly along the West Coast. This economically vibrant area is particularly attractive due to its proximity to Asia and its familiarity to investors – there is a large Asian population and many investors went to school in this part of the world, have friends or relatives, or vacation here.”
The appetite from Asian capital for office product on the West Coast has substantially increased in recent months especially in San Francisco, Seattle and Los Angeles. Oceanside’s recent acquisition of the 2 million square foot First and Mission development site in San Francisco provides further evidence of this trend and the increasing size of investor bets.
The increasing activity in total Asian outbound investment and U.S. real estate is in line with CBRE’s 2015 Asia Pacific Investor Intentions Survey, wherein 32% of respondents expressed the intent to deploy capital outside of the region, with a further 12% expected to spend more than in 2014. The strong economic recovery and sustained low interest rate environment in the U.S. have prompted some investors to shift their focus from Western Europe to North America, with 43% preferring North America, closely followed by Europe at 42%, opposed to a respective 20% and 23% split reported back in the 2014 Asia Pacific Investor Intentions Survey. Overall, investor interest towards Europe and the Americas is more or less on a par, opposed to Europe being clearly in the lead throughout the 2007 to 2012 period.
Asia – Second Largest Source of Cross-Regional Capital in Global Commercial Real Estate
Europe continues to attract a high volume of Asian capital, particularly from Taiwanese and Chinese insurers who have strong appetites for prime core assets in gateway cities. Taiwanese players have been actively acquiring quality stock in London—currently the world’s top investment destination—whereas Chinese insurers have increasingly diversified into continental Europe.
Marc Giuffrida, Executive Director, CBRE Global Capital Markets, commented ”Asian outbound investment enjoyed a strong start as a number of key deals stretched into the quarter, but we also saw under bidders moving on to alternative deals that kept the numbers buoyant. Based on our work levels, we expect to see growing interest in opportunities within Germany, while in UK regional areas this could be in office, retail and logistics. They are being drawn by the higher real-time yields, and we are now seeing rental growth. As growth is coming back to Europe, we foresee opportunities in commercial development as an alternative to buying core office buildings.
“Perhaps the most interesting area for growth is underway in the alternative space such as student housing, as well as health and aged care. The latter are two strategic areas where given the rapid shift in elderly demographics in Asia and around the world; we can expect the acceleration of patient capital providers from insurance groups and conglomerates.”
Global Selection of Some of the Largest Asian Outbound Transactions in Q1 2015
|Property Name / Address||Sector||Price||Country||City||Purchaser|
|Waldorf Astoria||Hotel||1,950||US||New York||Anbang Insurance Group|
|1801 K St NW||Office||445||US||Washington||Mirae Asset Global Investments|
|Fulham Broadway Shopping Centre||Retail||409||UK||London||Malaysia’s Employees Provident Fund|
|Sheraton on the Park||Hotel||354||Australia||Sydney||Sunshine Insurance Group Corp|
|Bentall Centre(50% stake)||Retail||287||UK||Kingston-upon-Thames||Gingko Tree Investment|
Source: CBRE Research, May 2015
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 2014 revenue). The Company has more than 52,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 370 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 at www.cbre.com