By Petra Blazkova on October 6th, 2017
Singaporean investors are Asia’s leading cross-border players and currently own thousands of properties abroad. Judging by recent activity, their sights are set on further expansion though they face pricing challenges in gateway markets globally.
Singaporean cross-border investors own 3,290 properties around the world as of the end of September, Real Capital Analytics holdings data shows. This pool of foreign assets is the largest of any Asian buyer group, followed by mainland Chinese investors. Industrial assets in the U.S. comprise the largest share, with close to 1,300 properties, followed by offices and industrial buildings in Australia and shopping malls in China.
As well as core assets in gateway markets, these investors hold student housing and manufactured home assets. Geographically, their holdings are well diversified since they explored opportunities in central and eastern Europe, Ireland and Spain.
While Singapore’s presence on the global scene dates back long before the Global Financial Crisis, capital exports have intensified since the credit crunch. The drivers to deploy capital abroad have been similar to their Asian peers: they are overexposed to their small domestic markets; they can borrow at low interest rates; and they have grown familiar with global real estate markets and their cycles.
Capital outflows have, on average, doubled each year since 2009, shifting a total US$106.5 billion since then. GIC, the country’s sovereign wealth fund, has led the buying spree, along with Temesek, Global Logistics Properties, Mapletree and CapitaLand.
As for the most recent trends, Singaporean cross-border acquisition activity climbed by 17% in the first half of 2017 compared to a year ago, and US$7.8 billion was exported. U.S. offices attracted 27% of all capital outflows in deals such as a partial buyout of the Deutsche Bank headquarters in Manhattan and the purchase of the Lafayette Centre in Washington. China received the second largest portion of Singaporean capital in H1’17 at US$850.0 million.
In the second half of 2017 and beyond, Singaporean investors will continue to shine, but to sustain their lead they may be required to employ new investment strategies and move up the risk curve. They are likely to forge new partnerships and joint ventures to access stock in new markets.
Singaporean buyers, together with their peers, face mature and fully-priced global markets. Office property yields are at historic lows globally, for instance, 4.3% in London and Manhattan, 4.8% in Sydney, and 4.0% in Tokyo. Going forward, this investor group may need to accept even more competitive pricing.