Institutional investors plan to stick to their investment plans for non-listed real estate in Asia-Pacific in 2021, a new survey finds. Despite the market turbulence last year, 77% of investors said the coronavirus pandemic has not changed their investment plans in the region.
Across all investment destinations globally, more investors reported plans to increase allocations to real estate than to reduce them because of Covid-19, according to the annual Investment Intentions Survey published by 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 United States.
This was particularly the case with Asia-Pacific investments as 22% of the respondents said the crisis has prompted them to increase their planned investments in the region. This compares with 16% who will increase investments for the US and 13% for Europe.
The survey also reveals that 72% of investors expect their allocation to Asia-Pacific to increase over the next two years, far higher than the proportion expecting an increase in allocation to the other regions.
This is higher than the number of Asia-Pacific investors expecting to increase allocations to their home region (59%). In fact, a larger proportion of investors from Asia-Pacific expect their US allocation to increase than expect their home region allocation to increase.
Investors based in Asia-Pacific had the lowest average actual allocations at 8.0% (compared with the 9.3% average globally) and the widest spread to their average target allocations of 9.7% (versus 10.0% globally), according to the survey. This suggests that Asia-Pacific investors should continue to invest in the asset class and will continue to do so in 2021.
After a period of four years, investors now generally believe that, in Asia-Pacific, core investments will offer the best risk-adjusted returns in 2021 instead of value-added ones, with 43% naming it as their preferred investment style as opposed to 39% who preferred value-added. About 18% believe opportunistic styles will offer the best risk-adjusted returns. This conviction strengthens when asked about which investment style they expect to invest in 2021, with 47% naming core, 36% naming value- added and 18% stating opportunistic.
Top destinations
In line with 2020, Sydney and Melbourne remain the top two investment destinations in Asia-Pacific with Tokyo being the third. China Tier 1 cities moves up one place to take the fourth spot from Osaka which drops to the fifth in this year’s survey. Seoul climbs to the sixth place from eighth in the previous year. Singapore, and other cities in Japan, Australia and China wrap up the top ten investment destinations for 2021.
Australian real estate will likely see much stronger interest from North American and European investors this year, with 100% and 83% of North American investors naming Sydney and Melbourne as a top investment location in 2021 compared with 60% and 40% respectively last year. Meanwhile the proportion of respondents from Europe naming Sydney and Melbourne as among their destination rose from 75% to 82% and 66.7% to 73% respectively. However, Tokyo is for the second time the year’s top pick for European investors, with 91% naming it as among their most preferred investment destination.
The office sector reigns among all sectors in Asia-Pacific with 84% of investors expressing their intentions to deploy capital there within the next two years. Such figure remains consistent throughout the past seven year’s results. Similarly, the industrial-logistics sector has maintained the second spot in investors’ preference in the region for the last five consecutive years. For the second year, the residential sector is the third most sought-after sector with 68% of investors indicating their intention to deploy capital there.
