Credit: Albert Chua/The Edge Singapore
SINGAPORE (EDGEPROP) - An annual survey by CBRE has found that Singapore is the third preferred destination for cross-border real estate investment in 2022, after Tokyo and Shangai.
The survey, which covers all property types, polled more than 530 Asia Pacific-based investors.
This is the third consecutive year Tokyo has topped the list. Greg Hyland, CBRE’s head of capital markets, Asia Pacific, notes that Tokyo’s availability of low-cost financing, high liquidity and large volume of mature multifamily assets make it a market with continued strong appeal for international investors.
Singapore dropped one rung from second place in 2021 to third place this year. CBRE notes that investors remain drawn to the city’s offices, following a series of acquisitions last year by international fund managers in anticipation of steady rental growth, limited new supply and strong leasing demand from technology companies.
Other notable destinations that made it into the top 10 include Sydney, jumping from eighth place in 2021 to fourth place this year. CBRE attributes the higher ranking to a resurging interest in offices and logistics properties in the Australian city.
Hong Kong rejoined the top 10 list after slipping out last year, with international capital lured by repositioning opportunities and price discounts in the industrial and hotel sectors.
In terms of sector preference, the survey revealed that while logistics continues to be the preferred sector, interest has softened as more investors question whether pandemic-led demand growth can be sustained.
Instead, more investors are shifting their sights to office assets on a more optimistic outlook for leasing demand after the introduction of hybrid working was found to have only a negligible impact on brick-and-mortar office requirements.
In addition, the survey’s findings showed that among alternative assets, data centres continue to be the top focus, while demand is expected to strengthen for cold-storage and healthcare. In contrast, real estate debt has garnered less investor interest in this year’s survey, which CBRE attributes to ongoing debt-related difficulties faced by mainland Chinese developers.
Meanwhile, appetite for environmental, social and governance (ESG) investing appears to be growing, with 56% of investors surveyed adopting ESG criteria in their investments.
To finance upgrades for existing properties, developers, REITs and fund managers are increasingly turning to green financing. Henry Chin, CBRE’s global head of investor thought leadership and head of research, Asia Pacific, expects yields to remain stable at current levels.
Nonetheless, with government bond yields rising, future returns are expected to be driven by net operating income. “We expect investors, in their search for higher yields, to pursue value-added opportunities, such as upgrading older office assets to meet ESG criteria, and core-plus investment strategies such as acquiring prime assets with the potential for adjusting tenant mix or with shorter weighted average lease expiries to negotiate more competitive rents,” he says.