Preferences of South Korea-Based Private Real Estate Institutional Investors – February 2015

by Jie Xin Choo

  • 18 Feb 2015
  • RE

Asia-Pacific-based institutional investors in the global real estate market are more likely to make fresh investments in private real estate funds than their North America- or Europe-based counterparts. A Preqin survey conducted in Q4 2014 of more than 100 private real estate fund investors worldwide revealed that 76% of Asia-Pacific-based respondents are likely to make new commitments to private real estate funds in 2015, compared to just 32% of investors headquartered in North America and 28% of Europe-based investors.

Preqin’s Real Estate Online service currently tracks 367 Asia-Pacific-based institutional investors that have an interest in private real estate funds. South Korea hosts 14% of these institutions, preceded by Australia- (29%) and Japan-based (16%) institutions. These 50 South Korea-based institutions have at least $2.8bn of capital currently deployed in unlisted real estate vehicles.

In terms of geographic preference, 78% of South Korea-based investors display a domestic preference, with 27 institutions choosing to invest in their home country. However, the South Korean economy is facing several long-term issues, such as an ageing population and a difficult housing market, which may see more institutions target international private real estate investments in the future.  After Asia-Pacific, North America (60%) and Europe (55%) are the most preferred investment regions of South Korea-based institutional investors.

The above chart looks at the composition of these 50 investors by type of institution; insurance companies (26%) make up the largest proportion of South-Korea based investors in real estate, followed by public pension schemes (22%). Due to the need for these two investor types to meet long-term liabilities, constant revenue streams are a necessity. Therefore, it is unsurprising that 67% of South Korea-based investors favour private real estate funds that employ core strategies, followed by debt (59%) and core-plus vehicles (52%).

Mirae Asset Life Insurance exhibits the common investment preferences of South Korea-based private real estate investors, as discussed above. The KRW 20tn insurer is looking to invest in 20 unlisted real estate vehicles in 2015, and will focus on core and core-plus vehicles investing in domestic properties.

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