New | European real estate appealing to investors from across Asia

Despite global macro headwinds, uncertainties in domestic economies and the yuan depreciation, Asian investors’ interest in overseas real estate, especially in Europe, remains intact. They continue to seek diversification and yields for their asset and investments globally.

In 2015, the growth of European real estate investment was robust – with an increase of 30 per cent (by volume in Euro) compared to the previous year. The high level of interest is expected to continue this year despite a slower start in the first quarter, with some investors taking a wait-and-see attitude due to Brexit fears and uncertainties on the macro- and geopolitical front.

Investment activities in the region have been, and will continue to be, supported by signs of improving regional macro-economic conditions (albeit slow), the low interest rate environment, the weaker Euro and the increase of liquidity allocated to commercial real estate assets by global investors.

Traditionally, US investors are the most active in the European real estate market. While they still lead the game, contributing 21 per cent of the capital inflow in 2015 into Europe, their activity relative to other investors slowed down in the second half of the year.

Asian activity in particular increased and by the end of 2015, Asian investments accounted for approximately 6 per cent of capital invested in European commercial real estate, implying a whopping 50 per cent boost in Euro volume terms year on year.

The stronger demand from Asian investors for commercial real estate was largely triggered by rising investment levels from non-bank financial institutions, including Asian sovereign wealth funds, life insurance companies and pension funds. Over the past few years and across the region, alternative investment regulations have been eased, allowing for a greater percentage of their asset under management to be invested overseas including in real estate.