Research - APRIL 10, 2017

Asia Pacific investor intentions, 2017

by Jennifer Molloy

This year, three key concerns remain top of mind to Asia Pacific property investors — asset pricing, lack of availability and competition from other investors — according to CBRE’s Asia Pacific Investor Intentions Survey 2017.

For the fourth consecutive year, investor appetite to purchase assets in the region declined, with only 37 percent of respondents indicating they plan to increase their acquisitions activity this year, notes the survey. That number is down from 42 percent in 2016, 54 percent in 2015 and 64 percent in 2014, with investors remaining cautious about potential effects on cap rates and property valuations as interest-rate policies globally begin to shift upward, and at a faster clip.

“Investors are resigned to the fact that the zero or low interest-rate policy era is gone for now, if not for good, together with the easy gains from continued cap-rate compression,” states the report.

CBRE notes the vast majority of large Asia Pacific property deals this year are expected to include sovereign wealth funds, insurance companies and pension funds, which have a median capital deployment target of more than $1 billion, with many indicating they intend to deploy between $2 billion and $5 billion in 2017, and a few planning to deploy above $5 billion. By and large, these investors are seeking long-term capital appreciation, shifting their strategies toward build-to-core and other more opportunistic investments.

Investment managers of commingled property funds, which have limited investment horizons, however, expressed an increased preference this year, compared with 2016 and 2015, for core-plus assets over core assets, as they chase yield spreads for sought returns, according to the survey.

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