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LONDON: Global transaction volumes for commercial property are set to see growth of at least 15% in 2014, which will take the annual total to well in excess of US$600 billion (RM1,962 billion), acccording to Knight Frank’s latest Global Investment report.
The global property consultancy predicted that Chinese investments in international property will double this year with transactions reaching its highest level since 2007. The report also highlighted that Taiwanese investors are seeking more growth and diversification opportunities outside their local market.
Peter MacColl, head of capital markets at Knight Frank, said that the recent increase in outbound Asian capital into both commercial and residential international property has been “seismic”, particularly from China, and shows no sign of slowing down, particularly as newer equity from Taiwan, Korea, and private wealth make an impact.
“As 2014 progresses, their range of target markets and tolerance to risk will increase, as they become more comfortable with tier-2 cities and start to look further afield at new sectors such as retail,” he said.
MacColl attributes this to greater acceptance of risk, strong pricing in many capital cities and intense competition for stock.
“The relaxation in the rules surrounding Taiwanese insurers’ ability to invest abroad has set the scene for the country’s largest insurers to potentially become major players on the world property stage,” added Darren Yates, head of global capital markets research at Knight Frank.
He said there remains strict criteria governing insurance companies’ ability to invest in international real estate. However, several large operators are known to be already actively pursuing investment opportunities in international markets.
“In the short term, investors will be targeting central business district offices in major gateway cities such as New York, London, Paris, Tokyo and Shanghai,” said Yates, adding that these savvy buyers will be aiming for larger lot sizes, with prices ranging from US$150 million (RM490 million) up to US$400 million.
Cathay Life has reportedly received approval to pursue four assets in London and Fubon. Life said it could invest up to US$3 billion in overseas property over the next few years.
The amount of investment capital flowing in from the Middle East has also increased sharply. Real Capital Analytics data shows that sovereign wealth funds from this region doubled their acquisitions to US$18.8 billion in 2013. This trend is expected to continue apace, with the range of target markets likely to broaden.
Investors are showing an increased appetite for risk globally, with a particularly strong upturn in activity in peripheral European markets, notably Spain and Ireland and, to a lesser extent, Italy and Portugal.
“Taiwan’s biggest insurers combined could eventually deploy as much as US$3 billion in global property markets in the next two to three years and much more over the longer term,” said Yates.
He added that with outbound investments certain to increase over time, opportunities will arise for more inward foreign investments, as domestic players adjust allocations and dispose of assets.
This article first appeared in The Edge Financial Daily, on April 4, 2014.
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