Japan and Australia have been the traditional safe havens for cross-border investments in the region. However, a dwindling stock of prime assets for purchase are pushing jaded investors to look for opportunities elsewhere, says Knight Frank in its latest Asia Pacific Capital Markets Report.
Singapore and Hong Kong have in turn become the alternative safe havens. Both countries accounted for the three largest investment deals this year, while Japan and Australia witnessed a y-o-y decline in commercial real estate transactions.
The delay in interest rate hike by the US Federal Reserve also works in favour of prime properties in countries with pegged currencies such as Hong Kong and Singapore, as debt will remain cheap for an extended period. On the other hand, the negative interest rates introduced by the Bank of Japan have failed to curtail the Yen appreciation, making Japan properties pricier to acquire.
The most notable transaction this year was the acquisition of Asia Square Tower 1 in Singapore by Qatar Investment Authority for US$2.5 billion ($3.4 billion) from BlackRock. It broke the record for the largest deal in Asia Pacific. The second and third largest deals were for the sale-and-leaseback of Chinese Estates’ Interest in the Mass Mutual Tower to Evergrande for US$1.6 billion (HK$12.5 billion) and the purchase of Dah Sing Financial Centre by China Everbright for US$1.3 billion (HK$10 billion).
“For inbound investment, we are observing more sovereign wealth funds, private equity funds, listed companies and family offices looking out for investment opportunities in Singapore. As demand outstrips supply coupled with softening rentals, yields are expected to tighten,” notes Ian Loh, Head of Investment & Capital Markets at Knight Frank Singapore.
Separately, prime assets in Shanghai and Beijing have continued to emerge as alternative core markets for institutional investors. Notably, Corporate Avenue 3 was acquired by a joint venture between Lee Kum Kee and developer China Vanke for US$865 million (RMB5.7 billion).
“India is also becoming more attractive to investors with longer-term investment horizons due to its favourable demographics, infrastructure investment, growth in manufacturing and service industries, as well as initiatives such as the Delhi-Mumbai Industrial Corridor and Smart Cities,” notes Nicholas Holt, Knight Frank’s Asia Pacific Head of Research.
For outbound investment, Knight Frank continues to see Singapore investors acquiring overseas, particularly assets in Australia, Japan, Hong Kong and China.