in Hong Kong
Investment activity in the Asia Pacific (Apac) region decreased by 53.6% year-on-year (y-o-y) in 1Q2023, hitting its lowest level since 4Q2011, according to a research report by Knight Frank. However, in stark contrast to this, outbound investments from Apac to North America surged over 400% y-o-y to a record high of US$13.9 billion ($18.6 billion) in the same period.
Among Apac investors, Singapore topped the list in terms of investments in North America, at 89% of overall investment volume. GIC was the biggest investor, pouring in multiple deals such as a US$8.5 billion investment in US REIT Store Capital and its US$3.3 billion purchase of Canada’s Summit Income Industrial Reit. Other notable deals that drove investments into North America include City Developments’ purchase of the St Katherine’s Dock estate in London for US$468.2 million.
The US saw the highest proportion of Apac outbound investments, accounting for 58%, followed by Canada at 27%. The surge is due to investor interest in more efficient price discovery in mature markets such as the US, owing to the currency stability assisted in times of crisis.
Sovereign wealth funds dominated Apac outbound investments, accounting for 79% of investment volume in 1Q2023. The retail and industrial sectors were the most invested sectors, making up 45% and 40% of total volume respectively. This was spurred by re-pricing opportunities in a rising rate environment while there is limited competition.
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Investment activity in Apac other than Singapore saw significant drops. Seoul recorded the lowest investment volume since 1Q2015 at US$2.8 billion, with an 80% y-o-y drop. In Japan, while foreign investments rose, the overall transaction volume fell 17% y-o-y to US$9.4 billion in 1Q2023 due to banks tightening financing.
However, while the banking sector’s volatility continues to impede capital deployment in Apac, gradual adjustments in seller expectations, increased liquidity and activity in the second half of the year may offer hope. Ultra-high-net-worth investors, with their resilience to financial headwinds are expected to play a pivotal role in capital deployment.