The Asian real estate market presents a wide range of investment opportunities for investors. The region is home to business hubs such as Hong Kong, Singapore and South Korea where core assets are relatively in demand. Asia is also home to India and China, where demand for opportunistic and value added assets is high. Data from Preqin Special Report: Asian Real Estate reveals that investor appetite for Asian property has been increasing in recent months. In January 2014, Blackstone Group raised more than $3bn in commitments for its first Asia-focused fund. In February 2014, Canada Pension Plan Investment Board (CPPIB) established a $500mn separate account mandate with Piramal Fund Management to provide debt financing in residential projects across India, which was CPPIB’s second venture into the Indian market.
Preqin’s Real Estate Online currently tracks 902 institutional investors with an interest in unlisted Asia-focused funds. Collectively, these institutions hold a combined $27tn in assets under management, and have approximately $1.3tn allocated to real estate.
Pension schemes are the most prolific investor type as they represent 39% of the real estate investor pool targeting private funds investing in Asia. Twelve percent of institutional investors are foundations, while endowment plans and insurance companies each account for 8% of institutions which favor Asia-focused funds. Asset managers make up 6% of the 902 investors while superannuation schemes, banks, corporate investors and wealth managers each comprise 3% of real estate investors with an interest in Asia.
In terms of where these investors are located, a significant 51% of the investor pool is based in North America. West European institutions constitute 19% of investors which favor Asia while 17% of Asia-based institutional investors have a preference for their home region. Investors located in the Nordic region make up 6% of the institutions which are interested in Asian funds. Four percent of the investor pool hails from Australasia while 2% are based in the Middle East.
So what strategic preferences do these 902 institutions have? An overwhelming majority (79%) of the investor pool are interested in opportunistic real estate vehicles while 71% of institutions favor value added funds. This matches the finding in Preqin Special Report: Asian Real Estate that 80% of Asia-focused funds in market employ either opportunistic or value added strategies. Core vehicles are preferred by 62% of institutional investors while 48% of the investor pool with an interest in Asia is inclined to debt funds. Forty-seven percent of institutions are open to investing in core-plus vehicles while 40% of the investor pool favors distressed funds.