CBRE’s latest report—which analyzes the outlook and appetite of the region’s real estate investors—reveals that while Asia Pacific investors identified North America as their preferred destination for the second straight year, they showed stronger interest in Asian markets.
Some 43% of Hong Kong investors said they are more confident in their local market compared to 23% of survey respondents in 2016. While there is more optimism in the region, there has also been an increase in investors who view changes in government policy as the biggest threat to the property market – jumping to 24% of respondents in 2017 from 3% the previous year.
“Policy uncertainties in the US and Europe have prompted Hong Kong investors to focus on their own market as they are more familiar with the dynamics of the local environment,” said Marcos Chan, Head of Research, CBRE Hong Kong, Southern China and Taiwan. “While investors have expressed concerns about the impact of potential changes in government policy, we don’t expect any drastic adjustments to be made by the new Chief Executive of Hong Kong in the short term.”
Breakdown of Sector and Market Interest
Office real estate continues to attract the most Hong Kong investors, with 43% of respondents preferring office over other sectors, supported by strong occupier demand and a low-vacancy environment. Logistics properties, however, saw the deepest decline in interest from investors, falling from 20% in 2016 to 7% this year.
“Alternative sectors received continued strong interest from investors,” commented Tom Moffat, Executive Director, Capital Markets, CBRE Asia. “Demand for data centers is growing, particularly in Australia, Japan, Hong Kong and Singapore, whilst student housing in Australia has attracted strong demand from institutional investors amid the rapid increase in international students. Outside of Japan, multifamily assets haven’t been an established institutional sector in Asia, but we are seeing more investors exploring this strategy, including looking at development deals.”
Australia, Japan and China retain their status as the top three preferred cross-border investment destinations. Australia was the top choice for the second consecutive year as investors continue to be lured by its attractive risk/return profile and substantial liquidity. Interest in Japan faded amid worries that fundamentals might be peaking along with weaker economic growth. In China, investors’ interest is driven by strong economic fundamentals and the opportunity to purchase undervalued assets, however, current market conditions pose a challenge when seeking a positive yield spread.
CBRE’s fourth annual APAC Investor Intentions Survey was compiled from around 500 responses and was carried out online from December 8, 2016 to January 25, 2017. The survey covers a wide range of real estate investors, including funds or asset managers, private equity firms, developers, listed and private property companies, listed and unlisted REITs, and sovereign wealth funds, insurance funds and pension funds. Around 80% of respondents are companies domiciled in Asia Pacific and the other 20% are domiciled primarily in Western Europe, the Middle East and North America.
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
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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 (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.