Property groups such as Jones Lang LaSalle are putting more focus on sourcing investment opportunities for Asia's rich, as these clients show increased interest in real estate globally.
In December, the US firm set up its first dedicated private-client desk in Singapore, and it aims to replicate the model in Europe in the next 12 months. And sources say other real estate companies are making similar moves.
“We have decided to put more structure around and emphasis on high-net-worth clients as a group,” says Alistair Meadows, Asia head of the international capital group in Singapore.
As part of that initiative Jones Lang LaSalle is forming alliances with private banks to source property investments globally. Wealth managers are themselves putting more emphasis on real estate, having previously done so on an ad hoc basis, says Singapore-based Meadows.
There’s been a “re-emphasis on real estate investment” in the past couple of quarters, says Mykolas Rambus, Singapore-based CEO of Wealth-X, which provides intelligence on the ultra-high-net-worth segment.
Many families and individuals had already done well out of property and expanded into trading and natural resources, he notes, but recently they have been looking to return to bricks and mortar.
Jones Lang LaSalle’s private-client team is five-strong and covers research and client marketing, says Meadows. It is putting out monthly research, with its first publication drawing a correlation between HNW investment into real estate in global cities with universities that have a high proportion of Asian students.
The company pinpointed 10 such cities globally and researched what property is available in those places, and for how much in dollar terms.
Globally family offices and HNWIs are raising their allocations to real estate, says Meadows, with London a popular destination in recent years.
In 2011, of the £10.7 billion ($17 billion) of commercial real estate transactions in central London, 60% were undertaken by foreign buyers, he adds, including a growing proportion on HNW investors.
Paris is another key market in Europe, while in the US interest levels are high in key east- and west-coast cities such as Boston, Los Angeles, New York and San Francisco.
There are various factors behind this interest, with a structural shift in wealth from west to east, as well as a more global outlook among investors in the region.
Traditional sources of HNW capital have been places such as Hong Kong and Singapore, but increasingly it is flowing from China, Indonesia and Malaysia.
Institutional demand for global real estate has also risen in recent years. The momentum created by, for example, Malaysian pension funds such as EPF, KWAP and PNB, into such investment has encouraged private capital to make similar moves.
Typically these investors are buying buildings outright – taking 100% interest in freehold office investment property with long-term leases in place. But another trend is for Asian investors to seek a local developer as a strategic partner with which they can build residential property from which to extract robust ongoing returns.
Jones Lang LaSalle facilitated such a deal early this year for Amcorp, part of Malaysia’s AmBank group. The latter co-invested alongside London-based residential developer Native Land and Grosvenor into a residential development called Neo-Bankside on London's South Bank.
The demand is strong from the development side as well, since debt finance from banks is still expensive and tough to secure, notes Meadows. Hence Asian investors are bridging the funding gap for residential development, and having a partner is a good strategy, as they are unlikely to want to set up their own team in, say, London.
Meanwhile, there is also interest from European and US institutional investors in Asian real estate, but less so from private clients in those markets, he notes, "in part because they find Asia challenging from a direct real estate investment point of view – and find it tough competing with local players”.