Korean investors biggest Asian spenders in Europe during H1

Investors from Korea were the biggest Asian buyers of real estate in Europe during the first half of 2019, accounting for 67% of total cross-border investment from the region, according to new research from CBRE.

Led by large pension funds, SWFs and, more recently, asset management and securities companies, Korean investors have doubled their purchasing activity in Europe to $6.8 bn (€6.1 bn) within the last two years.

While major gateway cities in Europe, particularly Paris, Amsterdam and select cities across Germany were popular amongst Korean investors, capital cities in smaller European markets such as Ireland, Poland and the Czech Republic are also absorbing Korean capital.

Low domestic yields and positive hedging environments are key drivers for Korean investors’ purchasing activity, CBRE said.

Recent examples of Korean capital buying in Europe include the €370 mln purchase of the Hilton Parkview hotel in Vienna by asset manager Wealthcore in a joint venture with Korean asset manager Mastern; the acquisition of the CBX building in Paris-La Défense by Hines SGP, in a club deal with South Korean investor Hana Financial Investment and Daishin Securities, represented by Vestas Investment Management; and Hana's acquisition of an office property in Prague for over €115 mln.

Europe remained the top destination for Asian outbound capital in H1 2019, with investment totalling $7.2 bn, accounting for 37% of the total spent outside Asia. This compares to $10.7 bn in H1 2018.

 Overall, Asian outbound commercial real estate investment declined 25% to $19 bn in the first half of 2019, compared to the year-earlier period. CBRE attributed the decline mainly to ‘the rebalancing of portfolios by Chinese investors and global economic uncertainties’. 

Investors from Singapore constituted the second-largest source of Asian outbound capital in H1 2019, reaching $5.7 bn in purchasing activity and accounting for 15% of total cross-border Asian investment into Europe.

Since H2 2018, mainland Chinese investors have shifted from being net buyers to net sellers. In H1 2019, they disposed of assets in markets including London, New York and Vancouver – albeit at significant profit, CBRE said. This, along with existing capital controls, is likely to perpetuate the trend of net disposals, the adviser noted. On the purchasing side, activity is expected to be led by sovereign wealth funds (SWFs) and by corporates acquiring assets for self-use.

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