Since 2013, the aggregate value of private equity real estate (PERE) deals for Asian property has increased each year, reaching a record $27bn in 2017, as seen in the chart below. While PERE deal value has increased on a global basis over the same period, the rate of growth within the Asian market (3.3x) significantly eclipses that of the global market (1.2x), as a growing base of investors seeks exposure to Asian property. Furthermore, the increase in deal value in 2017 was significant, doubling from 2016, driven by the $8.1bn (CNY 55.1bn) acquisition of a portfolio of 16 land development sites by Vanke from Guangdong International Trust and Investment in June. This being said, even without this deal, Asian PERE investment value would have increased 40% in 2017.
The Six Nations
The Asian market boasts significant diversity, offering investors lower-risk property in core markets such as Tokyo and Hong Kong, as well as the opportunity for stronger yields in growing provinces or developing regions. Within Asia, several key markets emerge in terms of PERE deals: six nations constitute 98% of total PERE deal value since 2013:
- China: 36%
- Hong Kong: 17%
- Japan: 15%
- South Korea: 15%
- Singapore: 11%
- India: 4%
Greater China and Northeast Asia have represented the vast majority of Asian PERE deal flow since 2013. In 2013 and 2014, Northeast Asia dominated regional PERE deal activity; however, Greater China has seen an uptake in activity from 2015, with this region representing nearly three-quarters of aggregate Asian deal value in 2017. There are three key markets driving activity: Shanghai represents over 22% of total Greater China PERE deal value since 2013, while Northeast Asian deal value is dominated by the markets in Seoul (37%) and Tokyo (23%). South Asia has experienced growth in deal activity over the past three years. While aggregate deal value has remained relatively low, more PERE deals are being completed for South Asian assets, with the region representing one-fifth of deals completed in Asia in 2017, and one-third in 2018 so far (as at March).
For more information on Asian real estate deal flow including analysis of property types, capital flows and exits, please click here to download Preqin Special Report: Real Estate in Asia, April 2018.