After a peak in 2017, Asian investments in European real estate plummetted by almost 50% in Q1 and Q2 compared to the previous year, according to the latest research conducted by international real estate advisor Savills.
Savills attributed the decline primarily to the Chinese government’s restrictions to outbound investments. However, Chinese investors can still operate in the European markets through strategic alliances with local players and investors, the advisor said. That said, the focus is now shifting to sectors such as infrastructure, logistics, healthcare, senior housing and data centres.
While Chinese investments have slowed down, other Asian investors are increasing their investment volume in Europe. South Korea’s share of total Asian investment in Europe over the first five months of this year increased to 25% from 8% in 2017, while Singapore saw its share rise to 27% from 17%.
‘We anticipate the slowdown of Chinese inflows to be counterbalanced by more diversity in terms of source of capital (eg Korea, Singapore) and more geographical diversification across Europe, in terms of investment targets, given the right opportunities,’ the report concluded.
Korean investors meanwhile are showing greater flexibility in their investment strategies and are considering new locations and new sectors across Europe, the report shows. Between January and May 2018, they invested a total volume of €1.18 bn.
Germany gains ground
The bulk - or over 95% - of Asian investment in Europe targets seven markets: the UK, Germany, France, the Netherlands, Italy, Belgium and Spain.
The UK has traditionally been the preferred destination for Asian investments and that is also borne out by the latest report by Savills. But while the UK captured on average about 76% of the activity, it saw its share drop to 65% in the first five months of 2018. Meanwhile Germany saw its share double to 22% from 11% last year. Belgium was also particularly active in the first half of this year, with a share of 11%.
‘We believe that Europe remains an attractive investment proposition for Asian investors, supported by the expanding economy, low unemployment and healthy occupier demand for both traditional and alternative building uses,’ the report said.