Singapore's pool of foreign properties is now the largest in Asia

Strong cross-border capital flows drove overall commercial real estate investment activity to rise 16% YoY to $11.5b.

Singapore’s foreign asset pool of 3,815 global properties as of end-May easily beat the holdings of land-hungry investors from Mainland China for the Asian crown, according to data from Real Capital Analytics (RCA), in a move that highlights the city’s capital strength and reach despite its small size.

Strong cross-border capital flows drove overall commercial real estate investment activity in the lion city to rise 16% YoY to $11.5b (US$8.4b) in the past twelve months with the number of deals closed in Singapore hitting 91 transactions over the same period, RCA data showed.

Capital outflows have doubled each year on average since 2009, hitting US$160.4b in the nine-year period leading up to Q1, Petra Blazkova, senior director of Asia Pacific analytics at RCA told Singapore Business Review.

Also read: Singapore bought overseas properties worth $20.6b in 2017

Although deal activity has relatively slowed with Singapore trailing behind US, Canada and Germany in global cross-border activity, a general upward trend can be observed across Asia as investors continue to ramp up and snap overseas property deals.

“The drivers to deploy capital abroad have been similar to their Asian peers: they want to diversify portfolios that are traditionally domestic-asset heavy; they can borrow at low interest rates; and they have grown familiar with global real estate markets and their cycles,” Blazkova added.

GIC, GLP, Mapletree, CapitaLand have been leading the buying spree as developers are increasingly embracing offshore real estate opportunities to diversify portfolios and ensure further growth that perhaps cannot be achieved back home.

Industrial assets in the US emerged as the largest share of cross-border foreign properties followed by offices and industrial buildings in Australia as well as shopping malls in China, testifying to the strong geographical diversification of the country’s cross-border investors.

“Historically, the destination of choice has been the Chinese real estate market, which has attracted 23% of all cross-border investments from Singapore since 2009,” Blazkova said, although US, UK and Australia have been emerging as key markets due to ample investment opportunities.

London has also emerged as another sought-after destination with Ho Bee Land buying Ropemaker Place for $862m.

Cross-border acquisition activity in Australia ballooned by 232% YoY in the last twelve months, and US$22.8b was exported to Australia with ARA Management acting on behalf of Suntec REIT and Korean KIC buying out DEXUS at Southgate Complex in Melbourne as a recent example.

Also read: Here's why Singapore is hanneling real estate investment into Australia

“Australia has been a popular overseas property destination for Singaporeans, especially for the recent two generations. It continues to maintain its appeal as evident from recent survey findings from Knight Frank’s 2018 Wealth Report, where Australia ranked second on the list of top five destinations where Singapore Ultra High Net Worth Individuals (UHNWIs) plan to buy prime property in 2018,” Alice Tan, director of residential project marketing, Knight Frank Singapore, said in an earlier interview.

Local investors also continue to direct capital to the Japanese and Indian markets in deals such as GIC purchasing 43% share of Shinjuku Maynds Tower in Tokyo for $571.9m in February and Ascendas India Trust buying three Indian I.T. parks for $343.2m in May.

“Looking ahead, the pattern of strong capital exports from Singapore should continue,” Blazkova added amidst a surplus in savings in the private and public sectors. “Singapore’s investors will continue to be drawn to offshore real estate opportunities that offer solid fundamentals, regulatory support, and market transparency.”