Institutional investors plan to increase their Asia Pacific allocations over the next two years, with more than $100 billion in new capital expected to flow into real estate in 2019, finds a new survey.
The latest Investment Intentions Survey finds 56.7 per cent of global institutional investors will increase their allocations to Asia Pacific real estate over the next two years.
The global survey, published each January, is a joint initiative of the Asian and European associations for investors in non-listed real estate vehicles (ANREV and INREV), and the Pension Real Estate Association. This year, 144 institutional investors and 10 managers responded to the survey.
European investors are leading the charge into Asia Pacific, with 69 per cent indicating their intention to increase allocations to real estate in the region over the next two years, followed by 50 per cent of US investors.
Meanwhile, most Asia Pacific investors, 48.1 per cent, intend to make no changes to their Asia Pacific allocations, with most instead preferring to increase allocations to the US and Europe, 58.3 per cent and 54.2 per cent respectively.
This bullish stance on real estate comes as global investors indicated their intention to place a minimum of AUD$102 billion of new capital into the asset class in 2019, more than the $75.5 billion designated in 2018. Around $63 billion is earmarked for non-listed vehicles.
For the first time, 100 per cent of investors surveyed stated they would invest in Asia Pacific’s office sector, followed by 80.6 per cent who said they would invest in industrial and logistics – a higher proportion than last year. Meanwhile, 63.9 per cent of investors said they would invest in retail.
Healthcare has also seen a notable uptick in interest, with 16.7 per cent of investors saying they will invest in the sector – up from 10.5 per cent in the last survey. While this sector was only a target in Australia last year, participants this year have indicated they will also target the sector in Japan.
Also for the first time, Melbourne’s office sector ranked first in the city-sector combination ranking, selected by 67 per cent of investors and replacing Sydney offices at the top spot. Sydney industrial and logistics ranks third.
Amélie Delaunay, ANREV’s director of research and professional standards, says the 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.”