USD435bn of new capital targets commercial real estate globally

SINGAPORE, March 15, 2017 – The amount of new capital available for global real estate investment in 2017 stands at USD435bn, according to Cushman & Wakefield’s The Great Wall of Money report, which tracks the amount of newly-raised capital, including debt and equity, targeting real estate at a global level. The report states that the total global wall of money in 2017 has fallen by 2% compared to 2016’s peak of USD443bn but is the second highest figure recorded since 2009. Of the USD435bn figure noted for 2017, capital targeting EMEA shrunk 9% in US dollar terms to USD130bn, whilst the Americas grew by 2% to USD173bn and Asia Pacific posted a marginal increase to USD132bn.

In Asia Pacific which accounts for 30% of the global volume, China, Japan, Australia and Hong Kong ranked in the top 10 target investment destinations globally, with Singapore and India a few spots behind at #12 and #15 respectively. The growing investment interest in Asia Pacific reflects the maturity and growth of opportunities across the region as well as the prospects for attractive returns.

Top 15 Target Markets 2017, USDbn (Source: Cushman & Wakefield)

China is expected to remain the second most targeted country after the United States, with a majority of capital committed from domestic funds. There are a number of overseas funds seeking a foothold in China as rapid economic development provides a growing investment base, including a number of US domiciled funds. While opportunistic strategies continue to dominate Asia Pacific and will continue to see a large share of multi-country funds, China-specific strategies are also attracting a growing share of this capital.

Sigrid Zialcita, Managing Director, Asia Pacific Research at Cushman & Wakefield said, “Chinese capital, which formed about 13% of total cross border investment globally in 2016, is expected to be reined in with heightened scrutiny of capital outflows. As a result of these capital controls, we expect Chinese investors to turn inwards and focus more funds on domestic markets.”

However, investments in Hong Kong from Chinese developers look to be sustainable. After years of operating outside their home markets, most Chinese developers have access to alternative financing means. They are also shifting their strategies, with increasing focus paid to either localizing its products to the home markets or promoting their developments internationally.

Japan is Asia Pacific’s second most targeted market. The majority of capital targeting Japan is domestic, reflecting the strength of the local J-REIT capital base and a strong home bias on the part of investors. However, the biggest change to Japan’s capital base is the growth of other Asian investors. Japan’s property market is luring more attention from pan Asian regional investors keen to reap capital gains or achieve high yields not available at home with a long-term view of holding their assets. The weaker Yen and the upcoming Tokyo Olympics 2020 are also generating positive investment momentum and the higher availability of assets in the regional cities, such as Osaka, is also expected to sustain investment volumes.”

“Japan and Australia remain amongst the region’s top destinations for real estate investments, with spreads, albeit narrowing, still offering a positive buffer against the spectre of rising bond yields. Relatively attractive yields found in Australian retail assets should also maintain solid investment demand for assets there. Meanwhile, yields in Singapore may compress further given the sustained demand for assets in Singapore from institutional investors due to the stable political landscape and safe haven status of the market,” noted Ms. Zialcita.

India’s strong showing in the rankings is a result of continued policy moves to institutionalize real estate investments in the country, with investors acquiring assets in anticipation of the introduction of REITs. Investments in the country’s office sector is expected to more than double this year with a number of pending major acquisitions.

Steve Saul, Managing Director, Singapore said, “Positive investment momentum in the region remains sustained and will continue to draw investor interest and ample capital. As the global market cycle matures, we expect investors to be increasingly rewarded by exploring secondary markets as well as investing beyond core strategies. The region, at the forefront of global growth and with an expanding real estate universe, will continue to present opportunities across the risk-return spectrum.”

He added, “Singapore remains an attractive destination for investment and business, given its stable economic fundamentals and status as a gateway city to the region. We see opportunities particularly in the office sector, where the boost in quality job creation will lead to more office space demand, particularly in well-conceived prime developments. The suburban retail sector remains an attractive proposition and there is also investment potential from the development of Singapore’s suburban commercial nodes.”

For further information, please contact:

Sigrid Zialcita
Managing Director, Research, Asia Pacific
+65 6232 0875

Foo Chek Yee

Head of Communications, Asia Pacific

+65 6317 8353