Asian Investors become The Main Source of Capital for Global Real Estate

Investors in the Asia-Pacific region have become the main source of capital for the global real estate market, according to a recent fundraising survey by real estate associations.

Investors in the Asia-Pacific region have become the main source of capital for the global real estate market, according to a recent fundraising survey by real estate associations. The report highlights that approximately 35% of the capital raised globally for private real estate investment in 2022 will come from Asia-Pacific (APAC) investors. Meanwhile, contributions from Asian investors have taken over Europe, dropping to 30% from 41% in 2021.

This marks the first time in six years that European investors have failed to dominate the global real estate capital market. Analysts suggest that this is because of the "active" nature of APAC investors compared to their European counterparts. While North American and APAC investors continue to increase their share of real estate, the average European institutions plan to reduce their share of real estate after having already exceeded their target allocation.

Asian Investors become The Main Source of Capital for Global Real Estate

Institutions in the APAC region are significantly under-allocated to real estate, with an average investment rate of 6.3%, two percentage points below their target of 8.3%. In contrast, European investors are over-allocated, with an average investment rate above their target allocation. INREV (Association of European Investors in Unlisted Real Estate) attributes the latest findings to different monetary policies of central banks in different regions.

The survey also shows a decrease in the expectation of raising capital for real estate in the future. Fewer market participants expect to maintain or increase fundraising activity over the next two years. While real estate is typically a long-term investment, ongoing market uncertainty is currently negatively impacting short-term funding prospects.

The rise of real estate financing in the Asia-Pacific region is a highlight in recent times and indicates a rapid shift in preferences for investors as the market experiences new shocks and uncertainty persists. The report also notes that strategic investment vehicles are the only category to see an increase in funding, with an increase from €8 billion to €64 billion by 2022. The modest drop in global funding from the previous year's record high indicates that activity momentum remains strong despite uncertain market conditions, but experts say it could also signal downside as interest rates rise.