Investors’ allocation to global real estate continues to grow, and in 2015 there will be an estimated influx of capital amounting to US$58.5 billion, according to new research from the Asian Association for Investors in Non-listed Real Estate Vehicles Limited (ANREV).
On balance, the research noted, investors intend to increase their portfolio weightings to real estate, with the average allocation to real estate expected to rise to 11.3 percent from 10.8 percent currently.
Similar to 2014, regardless of their domiciles, investors, fund managers and fund of funds managers’ main reason to invest in the sector is the diversification benefit from a multi-asset portfolio, followed by enhanced returns in second place.
The benefits of investing into real estate continue to attract capital from investors, ANREV said. Over the next two years, 59.4 percent of Asia-Pacific investors are expecting to increase their real estate portfolio allocation, which is higher than the global average of 45.8 percent.
Investor’s top three popular destinations in Asia-Pacific for 2015 are: Tokyo, Sydney and a third-place tie between Tier 1 cities in China and Melbourne.
In terms of sector, office is the most preferred sector to invest in 2015 by investors, fund of funds managers and fund managers, according to the report. The industrial and logistics sector ranks second for investors and retail being third.
Within the Asia-Pacific region, the preferred combination of destination and sector is, not surprisingly, Tokyo-Office with 45 percent of investors expected to invest into this market in 2015
In terms of investment route chosen by investors to increase their real estate allocation, non-listed real estate funds are still the preferred route, with 39.8 percent of investors expecting to increase their allocation in this product.
However, as observed since 2013, 28.1 percent of investors also increase their allocations to joint ventures and club deals which means that they continue to seek more control over their investment.
This is particularly the case for large investors whose favourite route is to increase real estate allocation through joint ventures and club deals (41.4 percent).
In comparison to 2014, fund of funds increased expectations for all products are higher. Fund managers’ perception of investors expected change in real estate allocation in Asia-Pacific show much more optimism; more than 70 percent of fund managers think investors will increase their allocation into joint ventures and club deals, direct real estate investment and non-listed real estate funds.
For the first time since the launch of the ANREV Investment Intentions survey in 2008, lack of transparency and market information is not the primary reason given by investors for not investing into non-listed real estate funds. This year it is tied for second place with alignment of interest with fund manager.
The availability of suitable products was the main concern for investors, which was ranked second in importance for fund of funds managers and fund managers.
Lastly, the report noted that investors and fund of funds managers see the ability to achieve target returns as the main challenge faced by managers in the market, whereas fund managers traditionally highlight the length of time taken to market, close a fund followed by the ability to raise capital as the challenges.
The 2015 survey attracted a record number of 337 responses in total. This year’s respondent comprised 144 investors, 174 fund managers and 19 fund of funds managers, with 168 from Europe, 82 from Asia-Pacific, 86 from North America and the remaining one from South America.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
