Asset owners return to Asian real estate

By Yvonne Chan | 19 February 2013

An estimated $110 billion is expected to flow into Asian commercial real estate this year, making up onequarter of the global total, forecasts Jones ang a!alle"
Rising inflation and cheaper borro ing costs are leading institutions increasingly to vie property as a safe haven! resulting in an e"pected rise in allocations to the asset class in #sia this year$ %&ore institutional 'oney is co'ing to real estate! or is available for real estate! both on the debt and the e(uity side!) says *aul +uest! #sia,*acific head of research and strategy at -a.alle /nvest'ent &anage'ent$ 0he fir'1s parent! 2ones -ang -a.alle! forecasts that direct invest'ent into co''ercial property in #sia ill reach 3110 billion this year! up fro' 394$5 billion in 2012$ Regional inflo s are e"pected to account for about one,(uarter of the 3460,3600 billion esti'ated global total this year$ /n the long ter'! #sia ill be the biggest beneficiary of increased property invest'ent flo s! according to a 2ones -ang -a.alle report! The Advancement of Real Estate as a Global Asset Class$ 7irect co''ercial property invest'ent in #sia last year as 889 of the 2008 pea: value! co'pared ith 529 for the #'ericas and 459 for ;urope! the study indicates$ %Real assets li:e infrastructure! land and real estate have tangible value!) e"plains +uest$ %<hen inflation starts to accelerate! intangible assets tend to underperfor'$) %<hat as particularly evident in 2011! and 'ost of 2012! as a disproportionate appeal for the safest :ind of real estate!) says +uest! translating to core property assets$ =e adds that ith the easing of econo'ic orries hanging over ;urope and the >.! there has been less ris: aversion$ %0he predo'inant desire is still for pri'e core property! but there are a bigger nu'ber of investors! including institutional investors! illing to loo: a little bit up the ris: curve$) /n #sia! -a.alle is loo:ing at upgrading B? grade real estate to capture the greater ris: appetite! says +uest$ /t also favours logistics and hotel properties! as both are tied to #sia1s long,ter' econo'ic gro th$

@utside of #ustralia! the regionAs logistics 'ar:ets are relatively i''ature and ripe for the develop'ent of 'odern facilities! hich generate good (uality inco'e strea's! says +uest$ /n the hotel sector! occupancy rates in =ong Bong! .ingapore! .outh Borea and #ustralia are above C09$ D/n =ong Bong! it1s over 909!D notes +uest$ #s such -a.alle sees opportunities in building ne hotels! renovating old ones! or repositioning by bringing in an international hotel operator to replace a local brand$ D0here are different tactics! but e li:e that sector$D &ean hile! property debt is also e"pected to gain in popularity this year! ith a recent *re(in survey of institutional investors sho ing that 349 plan to allocate to real estate debt funds this year! co'pared to C9 in 2012$ 7ebt fund invest'ents are usually added to real estate portfolios at ti'es hen the vehicles are seen as generating returns ith a lo er level of ris: than e(uity invest'ents in property! *re(in notes$ 0he 31$56 billion Fortress 2apan @pportunity Fund // as the second,largest real estate debt vehicle to close during 2011,12! outsiEed only by the 32 billion Blac:stone Real ;state .pecial .ituations Fund //$