In recent years an increasing amount of Asian capital has been invested in the European real estate market, with London attracting a sizeable proportion of this capital. However, Asia-based private real estate managers appear to now be shifting their focus to other major European cities outside the UK.
As shown in the chart above, Germany has seen an increase in capital invested by Asia-based real estate investors: investments in the German real estate market amounted to €1.6bn in aggregate deal value in 2017, up from €76mn in 2016 and €540mn in 2015. Frankfurt received the most investment within Germany, with Asia-based fund managers purchasing €678mn in real estate assets in the city in 2017. This was bolstered by the purchase of T9 Building by Seoul-based Mirae Asset Global Investments from Credit Suisse Real Estate Investment Management for €316mn. As UK-based institutions attempt to anticipate the economic and regulatory effects of Brexit, some have looked at moving staff to Frankfurt; if this happens en masse, it may draw even more investment to Germany’s financial centre in the longer term.
Asia-based fund managers’ investment in London-based assets has shown a corresponding decline over the short term: in 2017, 22% of European private equity real estate (PERE) deals by
Asia-based managers took place in London, down from 47% in 2016. The purchase of assets in London by Asia-based managers accounted for 31% of aggregate European PERE deal value in 2017, a reduction from 48% in 2016. But, despite these changes, Asia-based private real estate managers continue to be attracted by investment in the UK. As a leading exporter of financial services – and with an internally respected legal system – the UK continues to draw investment from around the world. In 2017, 30% of European deals completed by global private real estate fund managers took place in the UK, representing 32% of aggregate deal value in Europe for the year.
Despite prevailing political uncertainty in Europe, overall investment in Europe from Asia-based private real estate managers has increased from €3.5bn in aggregate deal value in 2016 to €4.3bn in 2017.