Jones Lang LaSalle: Real estate investment boosted by economic uncertainty
Cross-border real estate investments in major cities across the globe are tipped to increase this year, despite concerns regarding economic uncertainty, according to Jones Lang LaSalle.
The global real estate services firm said that direct real estate investment is becoming more and more attractive to investors, even in the face of an uncertain economic future. This is because investors are hunting for a steady stream of income that does not fluctuate when the market is volatile in the way that other investments, such as stocks or bonds, may.
According to Alistair Meadows, Asia-Pacific head of International Capital Group at Jones Lang LaSalle and David Green-Morgan, the director of Global Capital Markets Research at the firm, real estate is increasingly being seen as a secure and steady investment whilst other asset classes are seen as being on shaky ground.
Mr Green-Morgan told The Korea Herald that some of the biggest investors into the real estate asset class over the course of this year would be Chinese and Middle Eastern buyers, adding that Korean outbound capital also rose significantly in 2015.
“Ironically the more volatile China has become and the more oil prices have dropped, we see more money coming into direct real estate. Chinese outbound money has doubled in the last two years and (money from) the Middle East increased 100 per cent between 2014 and 2015. The big macro trend is that we see more people wanting to put more money into direct real estate,” he said.
Mr Meadows agreed with Mr Green-Morgan, saying: “Korean outbound capital grew faster in percentage terms than Chinese outbound capital in 2015. Korean outbound capital grew by (almost) 70 per cent year-on-year versus Chinese outbound capital of 46 per cent.”
The experts also suggested that the vast majority of the money from Korean buyers has been injected into the US marketplace, swiftly followed by the European marketplace and Australia. In terms of European investment, Germany proved to be the most popular spot for Korean investors.
“Korean investors are seeking good, risk-adjusted returns, and those three markets – the US Germany and Australia – give stable income return to satisfy Korean investment objectives,” the Jones Lang LaSalle experts added.
More than half of Korean investment activity was made up of office investments, though the experts also confirmed that a rise in the number of investments into the industrial and logistics sectors had been noted, especially in the US, over the last few years.
In terms of European investors, much of their interest is being focused onto the global cities such as Tokyo and Sydney. Seoul is said to be becoming an increasingly popular focal point with international investors, as they pit it against other cities in the global power league.
“I think there will be selective interest in the Seoul office market. We see these global cities competing with other cities. So when international investors are looking into Seoul, they will be comparing Seoul against Tokyo, and Sydney as investment destination within Asia-Pacific,” said Mr Meadows.
“There is still demand, appetite from U.S., European investors. Probably one challenge is just the access to stocks, which is often controlled by Korean domestic institutions,” he added.
When looking at overall transaction activity in terms of international property investment, the US accounted for half of all transaction activities. The city of New York took the top spot on the list of transactional volume, with $48.3 billion over the course of 2015. Meanwhile, London came in second with $39.4 billion last year. Mr Green-Morgan confirmed that these figures were an “indication of how liquid New York and London are.”