Over half of institutional investors to increase Asia-Pacific property allocations: Survey

Sydney, Melbourne and Tokyo are still the key investment destinations for global investors.
Sydney, Melbourne and Tokyo are still the key investment destinations for global investors.PHOTO: REUTERS

SINGAPORE - Over half of institutional investors globally, or some 57 per cent, intend to increase their allocations to Asia-Pacific real estate over the next two years, a survey showed.

According to the latest Investment Intentions Survey of institutional investors and funds of funds managers published by ANREV, INREV and PREA, European investors are the most bullish on the Asia-Pacific, with 69 per cent of those polled looking to increase allocations to real estate in that timeframe, followed by 50 per cent of US investors.

However, 48 per cent of Asia-Pacific investors polled intend to make no changes to their Asia-Pacific allocations, with most instead preferring to increase allocations to the US and Europe.

Sydney, Melbourne and Tokyo are still the key investment destinations for global investors.

This bullish stance on real estate comes as global investors indicated their intention to place a minimum of US$72.7 billion of new capital into the asset class in 2019, up from US$53.8 billion in 2018. Around US$45.1 billion of this total is going to be channelled to non-listed vehicles.

Asia-Pacific investors, however, are confident about real estate, with 40 per cent of investors from the region planning to increase their allocations to that sector over the next two years. Current average allocations to real estate increased to 10 per cent from 8.9 per cent in 2017.

Looking at the asset under management-weighted results, about 80.4 per cent of investors intend to increase allocations, indicating that larger investors will likely commit more than their smaller counterparts.

On a regional basis, while most Asia-Pacific and North America investors expect no change in their allocations, the majority of Europeans aim to boost theirs.

"More North American investors will decrease their commitments than their counterparts in other regions," the survey said.

Meanwhile, the vast majority of Asia-Pacific investors, or 81 per cent, say they will invest in core strategies as opposed to the near 19 per cent who say they will invest in value-added investments and 12.5 per cent, in opportunistic assets.For the first time, 100 per cent of investors surveyed stated they would invest in Asia-Pacific's office sector, followed by nearly 81 per cent who said they would invest in industrial and logistics. Some 64 per cent of investors said they would invest in retail. For the office sector, Melbourne was picked by two-thirds of investors, pipping Sydney to become the top choice.

Globally, investors have indicated they plan to invest US$28 billion in non-listed real estate funds.

"This year's survey highlights some interesting themes, with a clear trend of investors diversifying globally and building up their portfolio in Asia-Pacific. The appeal of the core market remains undiminished, particularly among Asia-Pacific investors. Despite pricing issues, investors clearly feel the benefit of these mature and liquid markets, where it is easier to invest."

"On the other hand, we can see them moving up the risk curve, and looking for more riskier types of investments such as value added and opportunistic strategies," said Amélie Delaunay, ANREV's director of research and professional standards.