One of the interesting trends of the current real estate climate is that both Asia-Pacific (APAC) and Europe based investors are looking to expand their footprint into each other's markets.
According to the latest ANREV investment intentions survey, European investors are demonstrating the greatest interest in APAC, with 61% expecting to expand their allocations in the region in 2023 and 2024. They are attracted to the diversification opportunities, access to new markets, and specific sectors such as the growing multifamily market that the APAC region offers.
The Asia Pacific economy has proven to be strongly resilient, with positive GDP growth and real estate investment returns despite the recent global economic turmoil. Total annualized return for Asia Pacific funds had been positive over the 1-year, 3-year and 5-year period, at 5.2%, 6.0% and 7.1%, respectively, according to the latest ANREV Fund Index. We expect real assets in Asia Pacific to continue to generate positive returns for investors this year and beyond.
At the same time, APAC-based investors are also looking to expand their footprint in Europe, with 59% of ANREV survey respondents indicating an intention to increase allocation in Europe over the next two years. The increase in capital flow from APAC to Europe in 2022, especially in the U.K., where the total investment volume from APAC-based investors had more than doubled from USD 6.9 billion in 2021 to USD 15.6 billion in 2022, is a testament to this trend, according to data from MSCI.
The rapid macroeconomic changes, including interest rate hikes in Europe/the U.K., have resulted in sellers being more willing to adjust prices quickly, which has helped attract international investors to the region. In addition, Europe's longer lease tenure is also a top consideration for APAC-based investors seeking stable income returns.
In conclusion, the Asia-Pacific and Europe regions share many characteristics, comprising established destinations for global capital alongside emerging markets. Despite the challenging economic environment across the globe, there are signs of significant opportunities for investors. By re-examining their assets and diversifying their options, investors can position themselves to capitalize on these opportunities and prepare for the rebound.
For more on investment opportunities across Asia Pacific, visit our Real Estate Investment Hub here.