Global commercial property investment set to rise 15% in 2014
Global transaction volumes for commercial property are set to see growth of at least 15% in 2014, which will take the annual total to well in excess of US$600 billion, according to the latest analysis.
The report from international property company Knight Frank also says that Chinese investment into international property is set to double in 2014 as transactions reach their highest level since 2007.
And it highlights the fact that Taiwanese investors are seeking more growth and diversification opportunities outside their local market.
‘The recent increase in outbound Asian capital into both commercial and residential international property has been truly seismic, particularly from China, and shows no sign of slowing down, particularly as newer equity from Taiwan, Korea, and private wealth impacts,’ said Peter MacColl, head of capital markets at Knight Frank.
‘As 2014 progresses, their range of target markets and tolerance to risk will increase, as they become more comfortable with tier 2 cities and start to look further afield at new sectors, such as retail. This is driven by a greater acceptance of risk, the fact that pricing is strong in many capital cities and intense competition for stock,’ he explained.
The relaxation in the rules surrounding Taiwanese Insurers’ ability to invest abroad has set the scene for the country’s largest insurers to potentially become major players on the world property stage, according to Darren Yates, head of global capital markets research at Knight Frank.
He pointed out that there remain strict criteria governing insurance companies’ ability to invest in international real estate, but a number of the large operators are known to be already actively pursuing investment opportunities in international markets.
He expects short term, target markets to be CBD offices in major gateway cities such as New York City, London, Paris, Tokyo and Shanghai, with target lot sizes tending to be at the larger end, ranging from US$150 million up to US$400 million.
Cathay Life has reportedly received approval to pursue four assets in London and Fubon Life recently suggested it could invest up to US$3 billion in overseas property over the next few years.
The amount of investment capital emanating from the Middle East has also increased sharply. Real Capital Analytics data shows that sovereign wealth funds from the Middle East doubled their acquisitions to US$18.8 billion in 2013. This trend is expected to continue apace, with the range of target markets likely to broaden.
Investors are showing an increased appetite for risk globally, with a particularly strong upturn in activity in peripheral European markets, notably Spain and Ireland and, to a lesser extent, Italy and Portugal.
‘Taiwan’s biggest insurers combined could eventually deploy as much as US$3 billion in global property markets in the next two to three years and much more over the longer term,’ Yates explained.
‘With outbound investment certain to increase over time, this will also create opportunities for more inward foreign investment, as domestic players adjust allocations and dispose of assets,’ he added.