Singapore has emerged as the primary source of Asia Pacific real estate investments YTD, surpassing the US for the first time, according to a report by Knight Frank.
Knight Frank's 3Q2023 Asia Pacific Capital Markets research found that Singapore investors injected nearly US$8.5 billion into Asia Pacific real estate, surpassing the US’s cross-border investment value by nearly 50%.
Knight Frank global head of capital markets Neil Brookes says many private offices and government-linked companies (GLCs) in Singapore retain significant equity ready to be deployed. The wider market dislocation caused by rapidly increased borrowing costs creates opportunities for all equity investors to deploy capital while many other institutional investors are sitting on the sidelines, he adds.
“The strength of the Singapore dollar is also driving large institutions such as GIC and other GLCs to pursue opportunities in markets such as Japan, China, South Korea and Australia. Notably, GIC has consistently increased its allocation to the real estate asset class, with investments in the US now accounting for approximately 22.4% of the total inbound investment volume from Singapore,” says Brookes.
Asia Pacific’s commercial real estate market saw limited movement in 3Q2023, with investment activity contracting 53.4% y-o-y. According to Knight Frank, the discernible pullback from domestic and international investors underscores their reluctance to invest in the current high-interest rate environment, in which yield spreads have narrowed to a certain extent that certain markets are experiencing negative risk premiums.
In response to these challenges, investors in the region have shifted their focus to new economy assets, particularly in the industrial and data center sectors. Meanwhile, the acquisition of office spaces has taken a backseat, reflecting the persistently challenging business sentiment and a weak return-to-office movement.
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“For industrial properties, the combination of limited supply of institutional-grade assets and sustained long-term demand from e-commerce, life science and technology are fueling investment interest. Similarly, the data center sector is increasingly viewed as a stable, long-term investment opportunity,” says Knight Frank head of research Asia Pacific Christine Li.
