In the run-up to the financial crisis, many large investors concentrated more on the value-added and opportunistic parts of their portfolios. But that has changed. As core real estate reassumes its traditional prominent place among large institutional investors, competition for properties has increased, leading to very high prices and very low cap rates in some major gateway cities. As investors search for safety and value, will the developing Asia Pacific core market soon have a place in more of their portfolios?
From the Current Issue
In late November 2011, I attended an annual REC conference for the European Union Chamber of Commerce in Korea (EUCCK) in Seoul — “How Asian Investors Will Change the Global Landscape.” The EUCCK started this conference in 2010 with the goal of helping Korean pension funds and other institutional investors who have been actively investing in European and other overseas real estate markets to better understand the investment environment.
It seems that every day there is a new article about direct foreign investment in the United States — particularly Chinese or other Asian investment. A Merchants Bank study estimates that rich Chinese — those with assets of more than 10 million yuan (US$1.6 million) — have about 3.6 trillion yuan (US$565 billion) invested overseas. Although only a small portion of this is invested in the United States, there is a swelling wave of Asian capital focused on the United States by family office and institutional investors. A major portion of this capital is focused on the West and East coasts of the United States, particularly San Francisco, Los Angeles, New York City and other international gateway cities.
Vietnam has often been a conundrum for institutional real estate investors: the short-term macro indicators (currency, interest rate, inflation) are too volatile, markets are underdeveloped and relatively illiquid, and qualified operators on the ground are few and far between. Countering these challenges, promises of opportunity beckon. Few would argue Vietnam’s mid- to long-term prospects are anything less than bright: a continued strong growth rate benefits from factors such as a hungry, aspiring workforce; a young population; relatively low-cost workforce; rich natural resources; a rapidly growing, and urbanizing, middle class; and a history of resilience among the population.
Graeme Newell is professor of real estate investment at the University of Western Sydney in Australia. He also is currently executive director of the International Real Estate Society. Newell has strong links to the real estate industry, both in Australia and overseas. He recently prepared a second major report for the Asia Pacific Real Estate Association (APREA), The Benefits of n Allocation to Asian Real Estate for Institutional Investors, and presented the findings in October 2011 at VIP – Asia Investor Roundtable, a conference jointly sponsored by Institutional Real Estate, Inc. and APREA. Newell spoke recently with Dr. Jennifer Molloy, editor of The Letter – Asia Pacific, to discuss the findings.
Singapore-listed Perennial China Retail Trust has agreed to acquire a 50 percent stake in a shopping mall in Chengdu, China, for S$455 million (US$357.7 million) from Shanghai Summit Group (Summit Group), which will continue to hold the remaining 50 percent interest in Chengdu Longemont Mall.