Link REIT’s purchase of two Singaporean shopping malls for $2.16 billion in December 2022 is the latest example of real estate investors shopping for discounted and distressed assets in the Asia Pacific region. According to CBRE’s 2023 Asia Champions Way Condo Pacific Investor Intentions Survey, 31% of investors polled are targeting opportunistic deals, which reflects a broader shift towards more opportunistic strategies due to current market conditions, such as the rising cost of finance and mild yield expansion. Industrial and logistics is amongst the most investor-preferred asset classes, followed by office and residential. Tokyo and Singapore remain top preferred cities for cross-border investment, while Vietnam continues to be a focus for core and value-add investors.
In December 2022, Link REIT, a Hong Kong-listed real estate investment trust, signed a deal to purchase two Singaporean shopping malls — Jurong Point and Swing By @ Thomson Plaza — from NTUC unit Mercatus Co-operative for $2.16 billion. This purchase price was 6.1% off the combined aggregate value of $2.3 billion for the two properties as of December 28, 2022.
Recently, a 28-storey Grade A office tower in Kowloon East, Hong Kong – the Goldin Financial Global Centre (GFGC) – was sold for HK$5.6 billion ($947 million) to a joint venture between Singapore’s Mapletree Investments and Hong Kong investment firm PAG. This transaction marked the end of a two-year legal tussle between creditors and distressed conglomerate Goldin Financial Holdings.
These transactions reflect a general shift in the Asia Pacific (APAC) property market towards opportunistic strategies such as acquiring discounted or distressed assets. According to CBRE’s 2023 Asia Pacific Investor Intentions Survey, 31% of investors polled prefer to invest in opportunistic deals, up from 26% the year before. Moreover, 60% of all funds raised by APAC-focused real estate said to involve opportunistic strategies, the highest amount in a decade.
The market conditions, including the rising cost of finance and mild yield expansion, are causing investors to become more prudent. Greg Hyland, the head of Asia Pacific capital markets for CBRE, believes that investment activity will accelerate in the latter half of 2023, especially with more clarity on economic conditions and China’s reopening.
The survey also found that 93% of APAC institutional investors expect their allocations to real estate to remain the same or increase next year. High-net-worth individuals, family offices and private investors displayed stronger buying intentions with a focus on core prime assets and selected opportunistic deals. The most preferred asset classes are industrial and logistics, followed by offices and residential.
Meanwhile, hotels and retail assets continue to suffer from low investor interest, largely due to the challenging market conditions. CBRE suggests that investors expect to secure a discount for shopping malls and high street shops. The consultancy also noted that healthcare-related properties, such as life sciences and medical offices, are now the top choice among investors who want to invest in alternative assets, overtaking data centres.
Tokyo is once again the top preferred city for cross-border investment in APAC, followed by Singapore. Vietnam’s Ho Chi Minh City and Hanoi were ranked third and tenth respectively. Hong Kong, on the other hand, returned to the top five this year, citing its reopened border with mainland China and more attractive valuations.