APAC Investment in North American Real Estate Hit Record in Q1, Led by Singapore’s GIC

Acquisitions of North American real estate by Asia Pacific-based investors jumped more than 400 percent year-on-year to a record $13.9 billion in the first quarter of 2023, according to Knight Frank.

The surge in property purchases was driven largely by Singaporean investors, with buyers from the city-state accounting for 82 percent of outbound investment from Asia Pacific and 89 percent of total asset trades in the region during the first three months of the year. That activity was led by sovereign wealth fund GIC, which backed some of the largest acquisitions during the period, Knight Frank said in a capital markets report.

North America was the destination for 85 percent of total outbound investment from APAC by value, marking the highest first-quarter volume on record. Christine Li, head of research for Asia Pacific at Knight Frank, said investor interest in outbound opportunities is being fuelled by more efficient price discovery in mature and liquid markets like the US.

“In times of crisis, US assets are often seen as a safe haven given the currency stability,” Li said. “We have also seen an increased interest in retail and industrial assets due to repricing opportunities in a rising rate environment while there is limited competition.”

Sovereign Dominance

With GIC driving the train, Asian sovereign investors dominated APAC outbound investment in the first quarter, representing 79 percent of total volume, with retail (45 percent) and industrial (40 percent) being the most invested sectors in the period.

The $690 billion Singaporean fund closed two blockbuster deals during the quarter: teaming with Oak Street to acquire US-based Store Capital commercial and industrial trust for $14 billion in cash and working with Toronto-listed Dream Industrial REIT to buy out Canada’s Summit Industrial Income REIT in a deal valued at $4.4 billion.

Using data from MSCI, the Knight Frank report showed the value of the Store Capital acquisition at $8.5 billion with the Summit buyout costing $3.3 billion.

Other significant outbound deals in the first quarter included Singapore-based City Developments Ltd’s $468.2 million purchase of the St Katharine Docks complex in central London from funds advised by Blackstone, as well as Chinachem Group’s $433 million buy of Deloitte’s headquarters building in the City of London, One New Street Square, from Landsec.

Institutional Buyers Sidelined

As outbound investment soared, investment activity within APAC plunged 53.6 percent year-on-year in the first quarter as volume reached the lowest level since the fourth quarter of 2011, Knight Frank said.

Neil Brookes, global head of capital markets at Knight Frank, said more challenging borrowing conditions continue to impede capital deployment in the region.

“Asset repricing and confidence on stabilising debt costs will result in increased investor demand,” Brookes said. “Looking ahead, ultra-high-net-worth investors, with their unique investment goals and resilience to financial headwinds, are expected to play a pivotal role in capital deployment, in contrast to institutional buyers who are still impacted by a higher cost of capital.”

Singapore was the only APAC market to record higher transaction volume in the first quarter, though the $4.3 billion sum was padded by the closing of the Mercatus asset sales to Hong Kong’s Link REIT and a joint venture of Frasers Property and Frasers Centrepoint Trust. Knight Frank said the disposals took longer than expected to complete because of rising interest rates and choppy equity markets.

Among the region’s other large deals, Singapore-listed Mapletree Logistics Trust bought a portfolio of properties in Japan, South Korea and Australia from affiliates of CBRE Investment Management for $687 million, while Japan’s Sekisui House REIT sold the Gotenyama SH office building in Tokyo’s Shinagawa ward to local IT firm TIS Inc for $513.2 million.