Global transaction volumes for commercial property are set to see growth of at least 15% in 2014, taking the annual total to well in excess of US$600bn, according to the Spring 2014 Global Capital markets report from Knight Frank.
Additionally, Chinese investment into international property is set to double in 2014 as transactions reach their highest level since 2007, and the report also highlights Taiwanese investors who are seeking more growth and diversification opportunities outside their local market.
Peter MacColl, Head of Capital Markets, from Knight Frank, said: “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.
“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.”
“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,” explained Darren Yates, head of Global Capital Markets Research, Knight Frank.
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. Short term, target markets will 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$150m up to US$400m.
Cathay Life has reportedly received approval to pursue four assets in London and Fubon Life recently suggested it could invest up to US$3bn 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$18.8bn 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.
Knight Frank’s Head of Global Capital Markets Research, Darren Yates, said “Taiwan’s biggest insurers combined could eventually deploy as much as NT$100bn (or US$3bn) in global property markets in the next two to three years and much more over the longer term. 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.”
A copy of the full report is available here.