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Tokyo, Sydney, Shanghai? Which city is the top destination for global real estate investors?

PUBLISHED : Tuesday, 12 January, 2016, 3:09pm
UPDATED : Tuesday, 12 January, 2016, 3:18pm

Global real estate investors will splash out at least US$57.9 billion this year and increase their portfolio weightings on the sector, finds a new survey.

The annual survey, in its ninth year, was carried out 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 Pension Real Estate Association (Prea).

“The momentum for 2016 is good. The result is pretty much in line with last year, showing real estate is still the hot cake for investors regardless of investors’ domicile,” said Amelie Delaunay, director of research and professional standards at Anrev.

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This year the survey attracted a record 345 participants comprising investors, fund managers and fund of funds managers globally, of which 221 are active in the real estate market of the Asia-Pacific region.

Delauney stressed the benefits of diversification through a multi-asset portfolio, with more stable income returns.

Investors, the survey found, intend to increase the weighting of global real estate in their portfolio this year, with the average allocation expected to rise to 10.3 per cent from the current 9.4 per cent.

Cities continue to be the favourites. In Asia-Pacific, Tokyo remains the most popular investment destination, followed by Sydney and Melbourne. Chinese tier 1 cities – Shanghai, Beijing, Shenzhen and Guangzhou – dropped one spot to fourth. Hong Kong moved up to fifth from ninth last year.

Offices continue to be most popular asset class for investors, particularly those in Tokyo and Chinese tier 1 cities. Delaunay expects the competition for core investments in Chinese Tier 1 cities to heat up as there are not enough high-quality assets.

The second preferred sector in 2016 is retail, displacing the industrial and logistic sector last year.

In terms of country plus sector preferences, a major change this year is China’s industrial and logistics sector falling out of the Top 10. It was No 4 last year.

“The market has been increasingly controlled by a small number of players and it’s very hard for new entrants to get in,” Delaunay said.