‘Asian capital will be back’
The pandemic has forced Asian investors to take a pause for reflection, but they will be back investing in Europe, experts agreed at the ‘Update Asia: cross-border investment trends, capital and opportunities’ briefing which took place at RealX Global, the first online trade fair organised by Real Asset Media.
‘Among Asian investors there’s still a real desire to deploy capital in the UK and Europe, but Covid-19 has led to a standstill,’ said Natalie Breen, Partner, Global Real Estate Legal Leader, PwC. ‘There is a wait and see attitude on sectors and the inability to travel and carry out due diligence is really causing a problem’.
Investors who have established a local presence in Europe have a distinct advantage, but they are in a minority.
‘Those who know the market well or have people on the ground are the exception, but for most Asian investors it has been difficult not to be able to see the asset they want to buy’, said Terence Tang, Managing Director, Capital Markets & Investment Services Asia, Colliers International.
However, they are still looking for opportunities across the globe, he said: ‘Asian markets don’t offer stability at the moment, so we still see a lot of interest from Hong Kong, Singapore and Japan for investments with long-term stable returns. Covid-19 pushed the South Koreans to deploy more capital in their home markets, but they are still very keen on European markets’.
The countries that have dealt better with the pandemic will be the onest ones Asian investors return to, said Breen: ‘The first to recover, like Germany, will attract more investment. Capital will keep a very close eye on developments in the health sector’.
Volumes are sharply lower in Asia this year, but real estate investors still have the resources and the appetite to do deals.
‘We have seen a drop of 39% in investment volumes this year because of the pandemic,’ said Tang. ‘But we also see a lot of institutions putting more money into real estate and taking the opportunity to increase their allocations’.
The slowdown has led to a pause, but there is a lot of capital ready to be invested.
‘The capitalisation of the industry is very solid,’ said Alan Dalgleish, Managing Director, Asian Property Intelligence. ‘This 2020 crisis has meant dislocation but it has also brought opportunities’.
The slowdown has not affected all markets equally, he said: ‘The top five markets, that offer depth and a lot of options to investors, are still doing well. Some cities like Seul, Sydney and Tokyo have seen substantial volumes’.
Some sectors have also flourished during the crisis at the expense of others. ‘Logistics and science parks have been in real demand because they are seen as resilient’, said Breen.
‘There has been unprecedented demand for last-mile logistics assets and data centres across all markets, to the point that there’s almost a worry about oversupply,’ said Tang.
There is a question mark over offices, as the uncertainty over future working practices makes investment committees reluctant to commit.