The majority of institutional investors are planning to stick to their future investment plans for non-listed real estate in the Asia-Pacific region in the coming year despite the pandemic, according to a new survey.
The data has come from the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV), the European Association for Investors in Non-Listed Real Estate Vehicles (INREV) and the Pension Real Estate Association (PREA) in the US.
Despite the turbulence of 2020, 77 per cent of respondents asked said that the coronavirus pandemic had not changed their investment plans in the Asia Pacific.
Globally, more investors reported plans to increase allocations to real estate rather than to decrease because of COVID-19. In the APAC region, 22 per cent of investors said the crisis had urged them to increase their planned investments, in contrast with 16 per cent for the US and 13 per cent in Europe.
Looking longer-term, 72 per cent of investors expect their allocation to the APAC to increase during the next two years, a higher proportion than those in other regions (51 per cent for Europe and 57 per cent for the US).
Amélie Delaunay, director of research and professional standards at ANREV commented the virus fallout has not “made any real dent in institutional investors’ appetite” for real estate in the region.
“Real estate investing is for the long term, with the survey clearly showing that the pandemic has not knocked the underlying fundamentals underpinning the growth of Asia Pacific’s real estate market, nor the important diversification role the region plays in portfolios,” Ms Delaunay said.
“Non-listed real estate funds remain the preferred investment route to Asia Pacific markets, with 65 per cent of investors indicating their willingness to increase their allocation through this route. This preference for non-listed real estate funds might have been reinforced by the travel restrictions in place due to the COVID-19 pandemic.”
However, a lower proportion of local APAC investors expected their allocations to increase in their home region (59 per cent).
Australian real estate to reap benefits
In line with 2020, Sydney and Melbourne remain the top two investment destinations in the APAC, with Tokyo being the third. China Tier 1 cities have moved up one place to take the fourth spot from Osaka, which dropped to fifth for 2021.
The report has forecast that Australian real estate will see stronger interest from North American and European investors this year. The survey saw 100 per cent and 83 per cent of North American respondents name Sydney and Melbourne as a top location in 2021 – compared to 60 per cent and 40 per cent respectively the year before.
The proportion of investors from Europe naming Sydney and Melbourne as among their destination rose year-on-year from 75 per cent to 82 per cent and 66.7 per cent to 73 per cent respectively. But Tokyo for the second year was the top pick for European participants, with 91 per cent naming it as their preferred destination.
The office sector reigned in the Asia Pacific, with 84 per cent expressing their intentions to deploy capital within the next two years. The industrial/logistics sector came in second, keeping consistent with investor preference in the region for the last five years.
The residential sector was the third most sought-after sector, with 68 per cent of investors indicating their intention to deploy capital there.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].