The vaccine rollout and easing of border restrictions has certainly boosted confidence in Asia Pacific’s real estate markets. Combined with competitive pricing in the region, and the increased costs of borrowing, once again investors are looking west for a deeper pool of opportunity.

The decisive return of Asia Pacific capital in Europe is evidenced by Real Capital Analytics data, which shows a 71 per cent year-on-year increase in investment volumes during Q2 of 2021.

Most (60 per cent) of the €2.6 billion of capital has been placed in the UK; sector-wise, European logistics claimed half of the Asian capital invested, followed by offices (23 per cent). There has also been a tripling of investment into residential.

Singaporean investors are behind much of this spending. They continued to deploy capital during the pandemic while others didn’t, but aided by well-established local platforms around European markets, they are now putting more energy into their European activities. In Q2 2020, €73 million was placed by Singaporean groups but by the second quarter of this year, this had grown to €1.26 billion.                           

We expect this to continue, either through a team based in their target market, re-upping positions with existing fund managers, or looking at more programmatic joint ventures.

Singaporean-based REITs will be especially influential in Europe. In only a decade, the market capitalisation of the Singapore-based REIT sector has bloomed from $30 billion to $100 billion. With this success comes the pressure to diversify, and increase stability of cash flows. For this reason, Europe will remain attractive to them. Portfolios of scale in the purpose built student accommodation, data centres and logistics sectors, will all be of interest.

By this time next year, we predict that South Korean firms will also be a headline story in Europe, should the world continue to recover from Covid-19. We are seeing growing evidence of South Korean investors bidding across markets again, albeit not quite to the same extent as before the pandemic.

Pressures in real estate markets at home are pushing South Koreans to migrate westwards. Seoul’s commercial real estate market is growing faster than any other global gateway city. Of particular note is an increasing demand from e-commerce firms and game developers who are boosting the office sector. 

Private capital is taking longer to return to Europe, albeit activity is starting to increase. A number of reasons has driven the absence of private investors from the region, but most relevant is a lack of pressure to invest. Overall, their purchases are entirely discretionary and as such typically it only takes a few barriers to cause a slowdown. The biggest currently is travel restrictions.

The good news, however, is that we are seeing more private investors from Asia Pacific accepting quarantines to execute transactions abroad than at any stage during the pandemic. There are buyers from Hong Kong, China, Korea and Singapore in Europe as we write. Once non-quarantine travel becomes more prevalent, probably towards the end of this year, we anticipate meaningful transaction volumes from this kind of capital will return with greater momentum.

Further information

Contact Callum Young or Rasheed Hassan

Contact Savills Capital Markets