E N HONG KONG E INVESTOR APAC INTENTIONS · PDF filelogistics and multifamily ... collaborate to provide real estate market research and econometric forecasting to real estate. ©

22.280792° N 114.175844° E

HONG KONG

35.689487 ° N 35.689487 ° E

TOKYO

31.230416° N 121.473701° E

SHANGHAI

-33.868820° S 151.209296° E

SYDNEY

-37.813628° S 144.963058° E

MELBOURNE

-27.469771° S 153.025124° E

BRISBANE

-36.848460° S174.763332° E

AUCKLAND

INVESTORINTENTIONSSURVEY2017A

PAC

CBRE Research

FRONT COVER

Contents

0807

14

Capital Flow Results and Intentions

Transaction volume in 2016 surges past 2015

Fund raising continues to grow but successful closes fall to five-year low

Fewer investors intend to deploy more capital

Sovereign wealth, insurance and pension funds to drive demand for major assets

Executive Summary

Key Threats and Obstacles

Economic worries top list of investor concerns but there is more apprehension around rate cycle

Asset pricing, availability and competition remain the key concerns

More investors motivated by yield spread

Investment motivation diverges by type of investor

31

22

Respondent’s Profile and Survey Methodology

Investment Strategies

Stronger focus on core-plus andopportunistic strategies

Funds shift focus to core plus strategies

Stronger interest in offices, weaker demand for hotels

SWIPe investors display growing appetite for logistics and multifamily assets

Major markets remain the focus but interest in Vietnam rises significantly

Budding demand for healthcare and retirement living

Asia Pacific investors retain strong intentions to invest abroad

Asia Pacific investors return to home markets

6%

28%10%

42%

37%

20172016

29%AUSTRALIA

14%JAPAN

Attractive risk/ Return pro�le

14%CHINA

10%VIETNAM

Stronger economic fundamentals driving rental growth

Key investment driver

*Results are based on cross border investors. Cross border refers to respondents domiciled in a different country to the most attractive destination selected.

*SWIPe include sovereign wealth funds, insurance firms and pension funds.% of investors intending to buy more

20172016

46%

25%

Investor motivation diverges

Yield spread(Real estate funds)

Capital appreciation(SWIPe*)

26%40%

2017

2016

14%Faster than

expected interest rate hikes

Global economic

shock

INVESTOR INTENTIONS SURVEY2017

ASIA PACIFICCBRE RESEARCH

Source: CBRE Asia Pacific Investor Intentions Survey 2016 and 2017.

CBRE RESEARCHThis report was prepared by the CBRE Asia Pacific Research Team, which forms part of CBRE Research – a network of preeminent researchers who collaborate to provide real estate market research and econometric forecasting to real estate.

© 2017 CBRE, Inc. Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

Major markets remain the primary focusbut interest in Vietnam rises significantly*

Economic worries are still the main concern but there is more apprehension around the rate cycle

More investors are motivated by yield spread

Few

er in

vest

ors

inte

nd

to de

ploy more

capi

tal t

his

year

6%

28%10%

42%

37%

20172016

29%AUSTRALIA

14%JAPAN

Attractive risk/ Return pro�le

14%CHINA

10%VIETNAM

Stronger economic fundamentals driving rental growth

Key investment driver

*Results are based on cross border investors. Cross border refers to respondents domiciled in a different country to the most attractive destination selected.

*SWIPe include sovereign wealth funds, insurance firms and pension funds.% of investors intending to buy more

20172016

46%

25%

Investor motivation diverges

Yield spread(Real estate funds)

Capital appreciation(SWIPe*)

26%40%

2017

2016

14%Faster than

expected interest rate hikes

Global economic

shock

INVESTOR INTENTIONS SURVEY2017

ASIA PACIFICCBRE RESEARCH


CBRE RESEARCHThis report was prepared by the CBRE Asia Pacific Research Team, which forms part of CBRE Research – a network of preeminent researchers who collaborate to provide real estate market research and econometric forecasting to real estate.

© 2017 CBRE, Inc. Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

Major markets remain the primary focusbut interest in Vietnam rises significantly*

Economic worries are still the main concern but there is more apprehension around the rate cycle

More investors are motivated by yield spread

Few

er in

vest

ors

inte

nd

to de

ploy more

capi

tal t

his

year

Executive Summary• Investment motivations are increasingly being driven by yield spread. The emphasis on

capital appreciation has weakened due to the current market cycle.

• An increasing number of investors view potential interest rate hikes as a major concern.

• Australia retained its status as the preferred cross-border investment destination,

increasing its lead over second place Japan.

• Outbound investment is set to remain robust but Asia has overtaken EMEA as investors’

preferred destination.

•Investors are moving up the risk curve in order to achieve their target returns.

Asia Pacific Investor Intentions Survey 2017

8 CBRE RESEARCH

Capital Flow Results and Intentions

120

100

80

60

40

20

0

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

70

60

50

40

30

20

10

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Num

ber

of tr

ansa

ctio

ns

US$

Bill

ion

35

30

25

20

15

10

5

0

US$

Bill

ion

Q1

Q2

Q3

Q4

Forecast

Number of transactions

Total number of funds closed (RHS)Interim close

Final close

Figure 1: Asia Pacific commercial real estate transaction volume

Remarks: Transactions include deals above US$10 million in the Office, Retail, Mixed, Industrial, Hotel and other commercial sectors. Residential and development site are excluded.

Source: CBRE Research, RCA, February 2017.

Transaction volume in 2016 surges past 2015The Asia Pacific commercial real estate investment market enjoyed another banner year in 2016, supported by the solid fund raising environment and robust demand from sovereign wealth funds, pension funds and insurance companies.

Full year transaction volume eclipsed that of 2015 and also marked the fourth consecutive year that the annual total exceeded US$100 billion, thanks to the record single

quarter transaction volume of US$34.9 billion in Q4 2016 alone. While the number of transactions fell to the lowest level in five years, average deal size rose by around 30% y-o-y.

It was against this backdrop that CBRE Research conducted its fourth annual Investor Intentions Survey focusing on the forward looking views of real estate investors in Asia Pacific.


9© 2017 CBRE, Inc.

120

100

80

60

40

20

0

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

70

60

50

40

30

20

10

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Num

ber

of tr

ansa

ctio

ns

US$

Bill

ion

35

30

25

20

15

10

5

0

US$

Bill

ion

Q1

Q2

Q3

Q4

Forecast

Number of transactions

Total number of funds closed (RHS)Interim close

Final close

Source: CBRE Research, Preqin, ANREV, January 2017

Figure 2: Private equity real estate fund raising

Fund raising continues to grow but successful closes fall to five-year low Asia Pacific continued to see robust fund raising activity in 2016. Private equity real estate fund raising including interim close amounts surpassed US$20 billion in 2016, exceeding the US$15 billion threshold for the third straight year.

Before the Global Financial Crisis (GFC), funds were mainly pan-regional opportunistic funds raised from US

and European investors. However, recent years have seen the emergence of value-added and core-plus funds, along with single country focused funds targeted at one or more sectors, as investors increasingly focused on return with adequate risk tolerance.

While the total volume of fund raising continued to grow in 2016, the number of successful closes declined to a five year low, reflecting the fact that capital is increasingly concentrated among a small number of fund managers with proven track records.


10 CBRE RESEARCH

Sovereign wealth, insurance and pension funds to drive demand for major assetsThe median level of expected capital deployment in 2017 for all investors is US$500 million or below. However, the median for sovereign wealth funds, insurance companies and pension funds (SWIPe) is over US$1 billion. Many SWIPe respondents indicated they plan to deploy between US$2 billion - US$5 billion this year, while a few intend to deploy in excess of US$5 billion. This indicates that many, if not most, of the large deals in the region this year will involve SWIPes.

Fewer investors intend to deploy more capital The survey found that investor appetite weakened for the fourth consecutive year, with just over a third of respondents saying they intend to invest more in 2017. The bulk of respondents said they plan to invest around the same as they did in 2016.

With global interest rate policy about to undergo its first major shift in almost a decade, and the speed and magnitude of forthcoming rate hikes and their impact on cap rates and property valuations yet to be seen, investors will understandably be more cautious in the coming year.


11© 2017 CBRE, Inc.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

60%

50%

40%

30%

20%

10%

0%

2014 2015 2016 2017

% o

f res

pond

ents

64%

42%

37%

54%

More than 20% lower

Between 10% - 20% lower

Up to 10% lower

About the same

Up to 10% higher

Between 10% - 20% higher

More than 20% higher

% Buy More

< US$ 500 million 500 million – 1billion > US$1 billion

Real Estate Funds

SWIPe

Property Companies and REITs

Overall

Note: Property companies and REITs include listed property companies, private property companies, developer, listed REITs and unlisted REITs.SWIPe includes sovereign wealth funds, insurance firms and pension funds.

Figure 4: Expected capital deployment in 2017

Source: CBRE Asia Pacific Investor Intentions Survey 2014, 2015, 2016 and 2017

Figure 3: Purchasing activity intentions

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

60%

50%

40%

30%

20%

10%

0%

2014 2015 2016 2017

% o

f res

pond

ents

64%

42%

37%

54%

More than 20% lower

Between 10% - 20% lower

Up to 10% lower

About the same

Up to 10% higher

Between 10% - 20% higher

More than 20% higher

% Buy More

< US$ 500 million 500 million – 1billion > US$1 billion

Real Estate Funds

SWIPe

Property Companies and REITs

Overall

WHY ARE INVESTORS

TURNING MORE CAUTIOUS?


14 CBRE RESEARCH

Economic worries top list of investor concerns but there is more apprehension around rate cycleRespondents identified economic worries as their key concern but worries eased compared to last year’s survey. In contrast, a higher number of respondents identified faster than expected interest rate hikes as a threat. Investors are

resigned to the fact that the zero or low interest rate policy era is gone for now, if not for good, together with the easy gains from continued cap rate compression.

At its last meeting in December 2016, the US Federal Reserve Open Market Committee (FOMC) signaled the likelihood of three interest rate hikes in 2017, up from the two projected at its previous meeting in September 2016. Overpricing returned as the second biggest investor concern this year, amid fears that valuations could come under pressure, either from leasing weakness or cap rate expansion.

Key Threatsand Obstacles


15© 2017 CBRE, Inc.

46% 16% 12%Global Economy

(China hard landing and/or weak global growth)

Overbuilding / Excess supply Domestic Economy

(recession or weakeconomic performance)

2016China hard landing and worries over weak global economic growth

16% 16%21%Overpriced Property Overbuilding / Excess Supply China Hard Landing

2015Yields compressed for �ve years and hit historical lows

16%25% 14%Faster Than ExpectedRises In Interest Rates

Overpriced Property

2017Real estate fundamentals expected to remain weak; more Fed rate hikes expected

Global Economic Shock Undermining Occupier Demand

Figure 5: Top three threats to Asia Pacific real estate market over the past three years

Source: CBRE Asia Pacific Investor Intentions Survey 2015, 2016 and 2017


16 CBRE RESEARCH

Asset pricing, availability and competition remain thekey concernsInvestors’ top three concerns remain unchanged: pricing, lack of availability and competition from other investors. Prime assets in core areas will continue to attract aggres-sive bids and squeeze potential returns, meaning that investors will need to be creative and flexible in sourcing assets. With so many large assets changing hands over the past 18 months, a lack of availability is set to remain a key

challenge for investors in the coming year. Competition among investors has been at its fiercest in Australia and Japan, which both saw transaction volume decline in 2016.

In spite of the ongoing depreciation of the RMB and the volatility of the Yen, only a small number of respondents identified currency risk as their major concern, primarily because most investors do not take a position on currency hedging when making investments. However, an increasing number of investors have begun to adopt partial currency hedges on transactions in China and Japan.

2016 2017

Yield Spread(over risk-free)

Yield Spread(over debt)

CapitalAppreciation

Higher RelativeIncome

GeographicDiversification

AssetDiversification

Inflation Hedge

AVAILABILITY AND/OR COST OF DEBT

ASSET PRICING

CURRENCY RISK

AVAILABILITY OF ASSETSLACK OF

INVESTMENT PARTNERS

TRANSACTIONCOSTS

TAX

COMPETITION FROM OTHER INVESTORS

LOW MARKETTRANSPARENCY

2015 2016 2017

30%40% 20% 10%

0%

5%

10%

15%

20%

25%

30%

35%

40% Chasing Yield Spread


Figure 6: Major obstacles to acquiring assets in Asia Pacific


17© 2017 CBRE, Inc.

2016 2017



CapitalAppreciation




Inflation Hedge

AVAILABILITY AND/OR COST OF DEBT

ASSET PRICING

CURRENCY RISK

AVAILABILITY OF ASSETSLACK OF

INVESTMENT PARTNERS

TRANSACTIONCOSTS

TAX

COMPETITION FROM OTHER INVESTORS

LOW MARKETTRANSPARENCY

2015 2016 2017

30%40% 20% 10%

0%

5%

10%

15%

20%

25%

30%

35%

40% Chasing Yield Spread

Source: CBRE Asia Pacific Investor Intentions Survey 2016 and 2017

Figure 7: Main investment motivation More investors motivated by yield spread Investors are increasingly shifting toward more fundamental investment objectives, with the proportion of respondents citing “investing for yield spread” and “chasing positive carry over funding” rising compared to last year’s survey.

More investors are seeking yield spread as room for further yield compression is limited in a reversing interest rate cycle. Without the tailwind of further cap rate compression, capital gains may be more challenging within the short to medium term, leading to fewer respondents citing capital appreciation as their major investment objective. The expectation of weaker rental growth across all sectors in most markets prompted fewer investors to focus on steady income returns. CBRE Research believes investors should continue to focus on asset level NOI growth to retain income return.

The survey also found an increase in the number of investors motivated by geographical diversification, mainly driven by international and especially Asian investors, which have low allocations to overseas real estate. In contrast, Pacific investors are less keen to invest abroad as they still enjoy a positive yield spread over government bonds in their home markets.

While the office yield spread remains positive, further narrowing is possible. CBRE’s 2017 Asia Pacific Market Outlook explained how continued cap rate compression and a spike in long government bond yields in most countries after upward interest rate movements in the US in late 2016 significantly reduced the buffer for positive yield spreads. Yield spreads in several key Asian markets, most notably in tier I cities in China, subsequently narrowed to 100 bps or lower. However, several regional markets, including four in the Pacific and two in North Asia, still offer attractive yield spreads of 200 bps or more.

-2% 0% 2% 4% 6%

Office Yield Spread

Ten Year HighTen Year Low

2017F

Yield spread narrowed to

100 bps or below

Perth

Brisbane

Tokyo

Auckland

Melbourne

Seoul

Sydney

Taipei

Beijing

Shanghai

Guangzhou

Singapore

Hong Kong

Shenzhen

Figure 8: Office yields vs 10 year government bond yields

Source: CBRE Research, Oxford Economics, January 2017.


18 CBRE RESEARCH

Investment motivation diverges by type of investorThe survey found that investment motivation differed according to the type of investor. Among SWIPe investors, more respondents indicated they would invest for capital appreciation, a finding running counter to that for other investors, but aligning with the more proprietary nature of SWIPe capital which provides them with a holding horizon sufficient to ride out shorter term volatility for longer term capital gain potential. Accordingly, they have shifted their investment strategy towards more opportunistic investments such as build-to-core.

Investors with more limited or finite investment horizons, such as real estate funds, displayed a stronger preference to chase yield spread to achieve desired returns through the use of appropriate leveraging. These include fund managers, which have shifted focus to yield spread given the lower cap rate and heightened risk of higher bond yields. Their stronger interest in core-plus assets is in line with this change in strategy.


19© 2017 CBRE, Inc.

*Note: Property companies and REITs include listed property companies, private property companies, developer, listed REITs and unlisted REITs. SWIPe includes sovereign wealth funds, insurance firms and pension funds


Figure 9: Investment motivation by type of investor

20162015 2017

Core Asset Core-plus Value-add Opportunistic Distressed Assets0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2016 2017



CapitalAppreciation




Inflation Hedge

50%

25%

0%

SWIP

e*

2016 2017



CapitalAppreciation




Inflation Hedge

50%

25%

0%

Real

Est

ate

Fund

s Pr

oper

ty C

ompa

nies

& R

EITs

*

2016 2017



CapitalAppreciation




Inflation Hedge

50%

25%

0%

8%

17%19%

16%

13%12%

HOW WILL INVESTORS

ADJUST STRATEGIES?


22 CBRE RESEARCH

in non-core areas or non-prime assets in core areas. To achieve a higher yield spread given the higher probability of higher bond yields and higher policy lending rates, investors are willing to take incrementally more risk, as reflected by the shift from core to core-plus.

The greater risk tolerance in exchange for higher potential returns is similarly reflected by the shift from value-add to opportunistic strategies, as the lack of prime assets for sale prompts more investors to take on development or redevelopment risk to build high quality assets meeting their required standards.

Stronger focus on core-plus and opportunistic strategies While investors are less willing to invest more in real estate compared to 2016 (refer to page 10), they do have a stronger appetite for slightly higher risk as they seek better returns.

While pursuing yield is most closely associated with a core strategy, the pursuit of higher yield is pushing investors towards core-plus, which entails investing in prime assets

20162015 2017

Core Asset Core-plus Value-add Opportunistic Distressed Assets0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2016 2017



CapitalAppreciation




Inflation Hedge

50%

25%

0%

SWIP

e*

2016 2017



CapitalAppreciation




Inflation Hedge

50%

25%

0%

Real

Est

ate

Fund

s Pr

oper

ty C

ompa

nies

& R

EITs

*

2016 2017



CapitalAppreciation




Inflation Hedge

50%

25%

0%

8%

17%19%

16%

13%12%

Source: CBRE Asia Pacific Investor Intentions Survey 2015, 2016 and 2017.

Figure 10: Preferred investment strategy

Investment Strategies


23© 2017 CBRE, Inc.

Funds shift focus to core plus strategiesReal estate funds demonstrated a stronger preference for core plus strategies in this year’s survey, as keen competition for core assets pushes newer core funds to seek core-plus opportunities.

Property companies and REITs displayed a more modest shift in their preference for each strategy, with the most notable change being stronger interest in opportunistic plays. Several REITs have already taken on more development or redevelopment risk in order to secure yield-accretive assets.

SWIPe investors have also shifted their focus to opportunistic strategies, with some of the more experienced groups taking on development risk through engaging in joint-venture projects with local developers. Opportunities to participate in build-to-core projects are now far more feasible than in previous years.

*Note: Property companies and REITs include listed property companies, private property companies, developer, listed REITs and unlisted REITsSWIPe includes sovereign wealth funds, insurance firms and pension funds


Figure 11: Preferred investment strategy by type of investor

0%

5%

10%

15%

20%

25%

30%

35%

40%

Office Logistics & Industrial Retail Multifamily/Leased Residential

Hotels/ Resorts

20162015 2017

SWIPe* 2016

2015

2017 26% 14%

6%8%

3%16%

Real EstateFunds

2016

2015

2017

8%

18%

40%

25%24%

32%

PropertyCompanies

& REITs*2016

2015

2017 38%

34% 10%

15%

8%48%

Core Asset

Core-plus

Value-add

Opportuntistic

Distressed Asset

20% 60%40% 100%80%0%

20% 60%40% 100%80%0%

20% 60%40% 100%80%0%


24 CBRE RESEARCH

0%

5%

10%

15%

20%

25%

30%

35%

40%

Office Logistics & Industrial Retail Multifamily/Leased Residential

Hotels/ Resorts

20162015 2017

SWIPe* 2016

2015

2017 26% 14%

6%8%

3%16%

Real EstateFunds

2016

2015

2017

8%

18%

40%

25%24%

32%

PropertyCompanies

& REITs*2016

2015

2017 38%

34% 10%

15%

8%48%

Core Asset

Core-plus

Value-add

Opportuntistic

Distressed Asset

20% 60%40% 100%80%0%

20% 60%40% 100%80%0%

20% 60%40% 100%80%0%

Stronger interest in offices, weaker demand for hotelsInvestor preferences by asset class generally registered minor changes from last year’s survey. The only notewothy shifts were stronger interest in offices and weaker demand for hotels.

Stronger demand for offices aligns with the back-to-basics theme of this year’s survey and reflects the sector’s solid liquidity and lower need for active management compared to other sectors. Australia, particularly Sydney and Melbourne, remains the most attractive office market due to stronger effective rental growth following a sharp reduction in incentives. However, investor interest in


Figure 12: Preferred sectors for investment

the Tokyo office market declined slightly ahead of the expected peak in rental growth in H2 2017 as occupiers turn more cautious. Appetite for tier I office markets in China also faded somewhat, as rents are expected to enter a downward cycle following the completion of a large volume of new supply.

The weaker interest for hotels is largely due to unfavourable supply fundamentals and pricier valuation in key markets such as Japan and Australia. Major cities in the former have seen occupancy decline as tourists visit newer locations, while there is also concern around upcoming supply. In the latter, yields are tightening and the lack of quality stock for sale is becoming acute, particular in Sydney and Melbourne.


25© 2017 CBRE, Inc.

50%

25%

0%

SWIP

e*

20162015 2017

Logistics & Industrial Retail Hotels/ ResortsMultifamily/Leased Residential

Office

50%

25%

0%

Real

Est

ate

Fund

s

20162015 2017


Office

50%

25%

0%

Prop

erty

Com

pani

es &

REI

Ts*

20162015 2017


Office

50%

25%

0%

SWIP

e*

20162015 2017


Office

50%

25%

0%

Real

Est

ate

Fund

s

20162015 2017


Office

50%

25%

0%

Prop

erty

Com

pani

es &

REI

Ts*

20162015 2017


Office

50%

25%

0%

SWIP

e*

20162015 2017


Office

50%

25%

0%

Real

Est

ate

Fund

s

20162015 2017


Office

50%

25%

0%

Prop

erty

Com

pani

es &

REI

Ts*

20162015 2017


Office

SWIPe investors display growing appetite for logistics and multifamily assetsInvestors of all types displayed weaker interest in hotels while most investors exhibited a stronger appetite for offices. Among other asset types, the most noteworthy trend was the stronger interest SWIPe investors displayed in the logistics and multifamily sectors.

SWIPe investors have longer investment horizons and larger economic scale which enables them to select a wider range of assets to achieve their return objectives.

SWIPe investors displayed a particularly strong interest in logistics & industrial assets in this year’s survey. This trend is being driven by structural changes to consumer purchasing habits and the lack of modern logistics facilities. Over the past three years a number of SWIPe investors have formed partnerships with specialist logistics developers.

SWIPe investors and real estate funds registered stronger demand for multifamily and leased residential assets as this sector offers relatively higher yields and provides steady rental income. However, opportunities are mainly confined to Japan, where worries around the potential rental decline in the office and retail sectors is pushing investors to consider multifamily and leased residential.

*Note: Property companies and REITs include listed property companies, private property companies, developer, listed REITs and unlisted REITsSWIPe includes sovereign wealth funds, insurance firms and pension funds

Figure 13: Preferred sectors for investment by type of investor


26 CBRE RESEARCH

Major markets remain the focus but interest in Vietnam rises significantlyAustralia, Japan and China retained their status as the top three preferred cross-border investment destinations. Australia was the top choice for the second consecutive year as investors continued to be lured by its attractive risk/return profile and relatively better liquidity. Within this market, Sydney is the most preferred city, followed by Melbourne and Brisbane. Japan held onto its second place ranking but interest in this country has faded somewhat in recent years amid worries that fundamentals might be peaking along with weaker economic growth.

Investors cited strong economic fundamentals and the opportunity to purchase undervalued assets as the two

SouthKoreaAustralia Indonesia ChinaSingapore Japan PhilippinesIndiaVietnam Hong

Kong

0% 5% 10% 15% 20% 25%

Already invested

Not invested, but actively looking for exposure

0%

5%

10%

15%

20%

25%

30%

35% Lower InterestHigher Interest

Student Living

Leisure/Entertainment

Automotive/Car Parks

Signle FamilyResidential

Data Centre

Infrastructure

Real Estate Debt

Retriement Living/Senior Housing

Healthcare

Self-‐storage

Higher N

ew Interests

47% Property Companies 27% Real Estate Funds13% SWIPe 33% Real Estate Funds 31% Property Companies16% SWIPe

20162015 2017

Source: CBRE Asia Pacific Investor Intentions Survey 2015, 2016 and 2017* Cross border refers to respondents domiciled in the different country as the most attractive destination selected

Figure 14: Preferred markets for investment (cross-border* only)

main attractions for investing in China. However, current market conditions pose a challenge to seeking positive yield spread. The prospects of additional capital controls and the further depreciation of the RMB are likely to ensure domestic rather than foreign capital dominates this year.

Interest in Vietnam rose significantly in this year’s survey. Investors are attracted to the country’s strong macro fundamentals and higher initial yields. However, investible stock remains limited, and the typical method of entry continues to be forming joint-ventures with domestic developers.

The popularity of Singapore represents a counter-cyclical play, with some investors believing that there are opportunities to acquire under-valued office assets before the market bottoms out in H2 2017.


27© 2017 CBRE, Inc.

SouthKoreaAustralia Indonesia ChinaSingapore Japan PhilippinesIndiaVietnam Hong

Kong

0% 5% 10% 15% 20% 25%

Already invested

Not invested, but actively looking for exposure

0%

5%

10%

15%

20%

25%

30%

35% Lower InterestHigher Interest

Student Living

Leisure/Entertainment

Automotive/Car Parks

Signle FamilyResidential

Data Centre

Infrastructure

Real Estate Debt

Retriement Living/Senior Housing

Healthcare

Self-‐storage

Higher N

ew Interests

47% Property Companies 27% Real Estate Funds13% SWIPe 33% Real Estate Funds 31% Property Companies16% SWIPe

20162015 2017

Budding demand for healthcare and retirement livingInvestors retain a strong interest in alternative sectors. While real estate debt remains the preferred option, very few investors without exposure to this segment are willing to invest, possibly due to the reversal of the interest rate cycle.

The biggest increase in interest was for demographically driven specialty asset classes such as retirement living/senior housing and healthcare, supported by the increase in the region’s

Source: CBRE Asia Pacific Investor Intentions Survey 2017

Figure 15: Preferred alternative sectors for investment

elderly and growing number of people with health insurance.

Large and small companies are increasingly creating, analysing and storing more data, helping to drive growth in demand for data centres, particularly in Australia, Japan, Hong Kong and Singapore.

Student housing in Australia has attracted strong demand from institutional investors amid the rapid increase in international students. However, opportunities in Asia are yet to be explored.


28 CBRE RESEARCH

2016 2017

0% 40%20% 80%60% 100%

SOUTH KOREAN

HONG KONG

CHINESE

AUSTRALIAN

YES

5%5% 14% 23%42%

YES, same as 2016

YES, lessthan 2016

YES, more than 2016

20172016

SINGAPOREAN

JAPANESE

46% 20%22%

Asia Pacific investors retain strong intentions to invest abroad While Asia Pacific investors retain a strong interest in outbound investment, most intend to invest around the same amount as they did last year.

Investors from South Korea displayed the strongest intentions to invest abroad, spurred by political uncertainty

and weaker economic growth at home. Chinese investors showed a stronger desire to invest overseas but their volume of investment could moderate following the imposition of stricter capital controls at the end of 2016. Larger deals may take longer to process and will attract more regulatory attention, meaning that Chinese investors may shift to smaller transactions. Elsewhere, Hong Kong’s strong USD-pegged currency and lack of investible assets ensured investors from this market retain a strong appetite for investing overseas.

Source: CBRE Asia Pacific Investor Intentions Survey 2016 and 2017

Figure 16: Outbound investment intentions


29© 2017 CBRE, Inc.

2016 2017

0% 40%20% 80%60% 100%

SOUTH KOREAN

HONG KONG

CHINESE

AUSTRALIAN

YES

5%5% 14% 23%42%

YES, same as 2016

YES, lessthan 2016

YES, more than 2016

20172016

SINGAPOREAN

JAPANESE

46% 20%22%

Asia Pacific investors return to home marketsWhile Asia Pacific investors identified North America as their preferred destination for the second straight year, the survey noted stronger interest in developed and emerging Asian markets. CBRE Research believes that policy uncertainty in the US and Europe will prompt Asia Pacific investors to focus on their own region as it is home to markets and dynamics with which they are more familiar. This is consistent with the increase in outbound investment within Asia recorded in 2016. Among emerging Asian markets, Vietnam registered increasing interest from South Korean, Japanese and Chinese investors.

Figure 17: Most attractive region for Asia Pacific investors

35%

30%

25%

20%

15%

10%

5%

0%

% o

f res

pond

ents

North America Developed Asia Emerging Asia Western Europe Pacific South andCentral America

Central and Eastern Europe

20162015 2017


30 CBRE RESEARCH

Figure 18: Profile of respondents

CHINA

International

29%18%

53%

Pacific

Asia

JAPANHONG KONG

SOUTH KOREAOTHERS

15%

13%

8%

SINGAPORE8%

5%

4%

DEVELOPER

LISTED PROPERTY INVESTMENT COMPANY/ LISTED REITS

PRIVATE PROPERTY COMPANY/ UNLISTED REITS

INSTITUTIONAL INVESTOR

FAMILY OFFICE

BANK-OWNBALANCE SHEET

PRIVATE EQUITY FIRM/ VENTURE CAPITAL

OTHERS

FUND/ ASSET/ INVESTMENT MANAGER

14%

31%

7%4%4%

8%

9%

9%

14%

CHINA

International

29%18%

53%

Pacific

Asia

JAPANHONG KONG

SOUTH KOREAOTHERS

15%

13%

8%

SINGAPORE8%

5%

4%

DEVELOPER

LISTED PROPERTY INVESTMENT COMPANY/ LISTED REITS

PRIVATE PROPERTY COMPANY/ UNLISTED REITS

INSTITUTIONAL INVESTOR

FAMILY OFFICE

BANK-OWNBALANCE SHEET

PRIVATE EQUITY FIRM/ VENTURE CAPITAL

OTHERS

FUND/ ASSET/ INVESTMENT MANAGER

14%

31%

7%4%4%

8%

9%

9%

14%

Source: CBRE Asia Pacific Investor Intentions Survey 2017


31© 2017 CBRE, Inc.

Respondent’sProfile & Survey Methodology

The fourth annual CBRE Investor Intentions Survey focuses on the forward looking views of real estate investors in Asia Pacific and was carried out online between 8 December 2016 and 25 January 2017.

A total of 504 responses were received, an increase on the 341 responses received in 2016. 80% of respondents were companies domiciled in Asia Pacific and the other 20% were domiciled primarily in Western Europe, the Middle East and North America.

For the purpose of analysis CBRE Research categorised some investors into groups. These included:

• Funds or asset managers (31% of respondents) and private equity firms (4%) which collectively accounted for 35% of respondents.

• Developers (14%), listed property companies & listed REITs (14%) and private property companies & unlisted REITs (9%), which collectively accounted for 37% of respondents.

• Sovereign wealth funds, insurance funds and pension funds collectively accounted for 9% of respondents. As the term “Institutional Investor” is a broad categorisation, CBRE Research used the acronym “SWIPe” to denote this group.

ASIA PACIFIC RESEARCH

Henry Chin, Ph.D.Head of Research, Asia [email protected]

Robert Fong, CFA Director, Asia [email protected]

Leo Chung, CFACapital Markets Specialist, Asia Pacific [email protected]

Karie KwanAssociate Director, Asia Pacific [email protected]

Roy ChengAnalyst, Asia [email protected]

COUNTRY HEADS OF RESEARCH

Stephen McNabbHead of Research, [email protected]

Zoltan MoriczHead of Research, New [email protected]

Sam Xie Head of Research, [email protected]

Marcos ChanHead of Research, South China, Hong Kong & [email protected]

Hiroshi OkuboHead of Research, [email protected]

Insub ParkHead of Research, South [email protected]

Abhinav JoshiHead of Research, [email protected]

Desmond SimHead of Research, Singapore and Southeast [email protected]

Dung Thuy DuongHead of Research, [email protected]

James PitchonHead of Research, [email protected]

CBRE RESEARCH

This report was prepared by the CBRE Asia Pacific Research Team, which forms part of CBRE Research—a network of preeminent researchers who collaborate to provide real estate market research and econometric forecasting to real estate.

All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy, completeness and currency of the information of this publication. This report is presented for information purposes only exclusively for CBRE clients and professionals, and is not to be used or considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments. All rights to the material are reserved and none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without prior express written permission of CBRE. Any unauthorized publication or redistribution of CBRE research reports is prohibited. CBRE will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication.

To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/research-and-reports

For more information regarding global research and activity, please contact:

For more information regarding global research and activity, please contact:

Follow CBRE

Nick Axford, Ph.D.Global Head of [email protected]

Henry Chin, Ph.D.Head of Research, Asia Pacific [email protected]

Tom MoffatExecutive Director, Asia Capital [email protected]

Bruce BakerExecutive Managing Director, Pacific Capital [email protected]

Yvonne SiewExecutive Director, Global Capital [email protected]

Richard Barkham, Ph.D., MRICSGlobal Chief Economist [email protected]

Jos TrompHead of Research, [email protected]

Spencer LevyHead of Research, [email protected]

© 2017 CBRE, Inc.

CBRE Research

FRONT COVER

22.280792° N 114.175844° E

HONG KONG

35.689487 ° N 35.689487 ° E

TOKYO

31.230416° N 121.473701° E

SHANGHAI

-33.868820° S 151.209296° E

SYDNEY

-37.813628° S 144.963058° E

MELBOURNE

-27.469771° S 153.025124° E

BRISBANE

-36.848460° S174.763332° E

AUCKLAND

INVESTORINTENTIONSSURVEY2017A

PAC

Documents

E N HONG KONG E INVESTOR APAC INTENTIONS · PDF filelogistics and multifamily ... collaborate to provide real estate market research and econometric forecasting to real estate. ©