The majority of institutional investors (77.5%) have declared to increase their allocation to Asia Pacific real estate in 2020, according to the global Investment Intentions Survey 2020 published by the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV).
The real estate sector, which is said to represent an average of 10.4% of institutional investors’ portfolios, would see a deployment of additional US$101.3 billion into global real estate in the coming year, according to the survey.
The Asia Pacific market was expected to attract of 31.9% of this capital in 2020, which was a significant increase from 19.6% in 2019, and only slightly lower compared to Europe which would receive the largest share (45%).
Across the region, Sydney and Melbourne would remain the top two investment destinations, with Tokyo taking up the third spot. Following this, Osaka would be the fourth most attractive market for real estate capital across the region while China Tier 1 cities dropped to fifth place.
According to the respondents, Singapore and Seoul also dropped from sixth to seventh and from fifth to eight spot, respectively, while China Tier 2 cities and other Japan cities were ranked for ninth.
The biggest two cities in Australia would attract predominantly Asian investors, of whom 63% stated Sydney as their preferred market and the another 58% indicated Melbourne.
As far as European and US investors were concerned, 75% and 60% rated Sydney highly as their preferred investment destination, respectively. At the same time, Melbourne seemed attractive for 68% of European investors and only 40% of the US investors.
In terms of sectors, office in the region continued to be most preferred as 90.2% of global investors naming it as their top investment sector. By contrast, industrial/logistics and residential were ranked as the top investments sectors by only 73% and 54%, respectively, by global institutional investors.
Interestingly, the top three combined city/sector preferences for investors were Sydney office, Melbourne office and, for the first time, Tokyo residential, underlining investors’ interest in this growing sector in the region, the survey found.
“Despite slowing returns, real estate is set to continue to attract new capital in 2020, especially in Asia Pacific where a lot of investors are still building their portfolios and looking to achieve further diversification,” Amélie Delaunay, Director of Research and Professional Standards at ANREV, said.
“With more fierce competition for core assets in the region, investors are moving up the risk curve to find new products.”