European investors to increase capital flows to Asia
14 Feb, 2006, Paris
Investment flows to Asia's commercial real estate sector are expected to increase this year and next, according to a survey of major European investors by Cushman & Wakefield Healey & Baker.
The survey shows how Asia is set to account for 9 per cent of the funds that the investors surveyed plan to invest in commercial real estate in 2006/2007, up from 5 per cent in 2005. Looking at the ranking of investor preference, Japan comes top in Asia, followed by South Korea, China, India, and then Hong Kong, which because of its special status with regard to foreign investors is listed separately from the rest of
The results were presented at Cushman & Wakefield's European Capital Markets Conference, held in Paris last week and attended by over 200 of the elite of the global investment markets, as well as by members of Cushman & Wakefield's Capital Markets Group. The respondents, with funds under management of more than €100bn, were planning to invest 7 per cent more in 2006 than in 2005.
David Hutchings, Head of Research of Cushman & Wakefield Healey & Baker (C&W/H&B), says: "The results of the survey coincide with our own projections; we forecast that globally investment in commercial real estate will increase from €350bn in 2005 to €380bn this year."
He continues: "Property has proved an attractive investment when compared with bonds and equities. Yield compression is likely to slow in most regions in 2006, however, we still expect the sector to produce highly competitive returns and, as a result, even though stock shortages are a real limiting factor, investment volumes are likely to grow further still in 2006."
Over the three year period to 2008, the investors surveyed plan to increase their funds under management by a total 53 per cent. The 'weight of money' is perceived to be the key factor driving yields (respondents saw yields as stabilising and possibly rising in 2008), followed by 'interest rates' and 'other market returns', with 'supply of property' coming fourth.
While Asia is due to account for 9 per cent of investment in 2006/7, Europe falls six percentage points to 83 per cent, North American allocations are set to rise after settling back in 2005, while a small number of investors (one per cent) intend to target South America.
In the US, San Diego is prime target for investors:
In a separate survey of investors in the US, 75 per cent of respondents expect yields to remain steady or decline further in 2006, with 89 per cent expecting rents to remain steady or rise. The most sought after properties for this year are full service hotels and industrial, followed by offices in Central Business Districts and then strip centres anchored by grocery stores.