Commercial transactions in Asia Pacific (Apac) to North America rose over 400% over a year up to US$13.9 billion ($18.6 billion) in 1Q2023, establishing an all-time record in accordance with a research report from Knight Frank. The US had the highest percentage of Apac outbound investment last quarter, with 58% and was followed by Canada with 27%.
The increase in Apac capital flows towards North America follows investor interest due to the faster price discovery in liquid and mature markets such as the US according to Christine Li, director of research for Asia-Pacific at Knight Frank. “In times of a crisis, US assets are often thought of as safe assets due to the stability of their currency,” she says.
As a group of Apac Investors, Singapore topped the list with regards to investments across North America, representing 89% of 1Q’s investment volume. GIC was the most significant investor, having a number of deals on the market, including an US$8.5 billion stake in US REIT Store Capital and its US$3.3 billion acquisition from Canada’s Summit Income Industrial Reit. The latter transaction boosted Apac investing in Canada up to US$3.9 billion in the first quarter of 2023 which was a record to date for Singapore capital outflows to Canada.
Other important Singapore investment opportunities across North America in 1Q2023 include City Developments, which made an US$468.2 million acquisition for the St Katherine’s Dock estate in London.
In general, Knight Frank highlights that Asian sovereign wealth funds were the most dominant Apac outbound investments in the 1Q2023 period which accounted for the majority of% from the overall volume. Industrial and retail were the top sectors for investment in 1Q2023, generating the majority of 45% or forty% of the total investment volume, respectively. “We have observed an increase in demand for industrial and retail assets because of the repricing opportunity in a rising interest rate environment and there is a lack of market competition” according to The Knight Frank’s Director Li.
Contrary to investments made in outbound markets the investment activity of Apac fell in Apac by 53.6% y-o-y in 1Q2023 and quarterly volumes reaching their lowest levels since 4Q2011. The decrease was caused by a broad decline across the border and in both sectors, according to Knight Frank.
In Apac, Singapore remained the sole market to see more investment volume y-o-y with transactions totalling US$4.3 billion in the 1Q2023 as compared to US$3.3 billion in the previous year. This was helped by the conclusion of the selling of a portfolio of retail assets owned by Mercatus Co-Operative, a unit of NTUC Enterprise Co-operative.
In December of last year, Mercatus announced the sale of Jurong Point and Swing By @ Thomson Plaza for $2.16 billion to Hong Hong Kong-listed Link REIT. Then, in January Mercatus made an announcement about the disposal of their 50% of its indirect share in Nex the to Frasers Centrepoint Trust and Frasers Property for $652.5 million. The selling of Mercatus’s Mercatus collection of properties was responsible for the majority of Singapore’s investments, according to Knight Frank.
In Apac, Knight Frank highlights that investment in Seoul reached their lowest point since 1Q2015. The total transaction that was US$2.8 billion, which is the decline of 80%. Additionally, in Japan even as foreign investment increased, the overall volume of transactions decreased by 17% in a year-on-year comparison up to US$9.4 billion in the 1Q2023, due to the growing concern about banks tightening their financing.
Yet, despite the fact that the volatility of the banking industry is a major obstacle to capital deployment in Apac, small adjustments to the expectations of sellers and a rise in activities and liquidity during the second half of the year can be a source of hope according to Neil Brookes, global head of capital markets at Knight Frank. He says that asset repricing as well as confidence in stabilizing the cost of debt will lead to increased demand from investors.
“Looking in the future, ultra-high net-worth investors, who have their own goals in investment and their resilience to financial challenges, are likely to play an important role in capital allocation as opposed to institutions that are more affected by the high cost of capital” the author states.