UK-based Savills Investment Management is seeking approval to set up its first office in China, as it embarks on a drive to expand in Asia, AsianInvestor can reveal.
The investment arm of property services group Savills hopes to double its $20 billion in assets under management in the next two years and would consider buying businesses in Asia to help it do so, said Justin O’Connor, CEO of Savills IM.
Savills IM invests some $2 billion of its global assets in Asia Pacific, but London-based O’Connor told AsianInvestor he would like to see that 10% double as a proportion of the total portfolio.
The Shanghai branch, which is expected to open in the second half of this year, will be the firm's fifth office in the region, alongside Hong Kong, Singapore, Sydney and Tokyo. It is being set up for client servicing, business development and investment purposes.
“In China we want to be close to our clients and joint-venture partners,” said O’Connor, adding that being on the ground would also help when it came to deploying capital.
The move into China comes after Savills IM recently hired an executive in Australia to man its new branch in Sydney and named its first Asia-Pacific chief executive, as reported. The firm is also planning to launch a second Japan investment vehicle to follow up on its Greater Tokyo Office Fund.
As for where he sees the biggest opportunities for growth in terms of Savill IM’s Asian client base, O’Connor pointed to Chinese, Korean and Japanese institutions, all of which are moving to allocate more overseas.
Savills IM does not yet have clients in Korea, he added, but institutions there and in China are rapidly ramping up their overseas assets. Moreover, Japanese pension funds have an “incredibly low allocation” to real estate of around 2%, said O’Connor, noting that the likes of Japan Post is moving to boost its foreign property exposure.
Organic asset growth is one strategy, but O’Connor is also open to acquisitions and partnerships, both strategies that Savills IM has used in the region already. The firm expanded into Japan in 2013 through the purchase of Merchant Capital, a real estate-focused Japanese merchant bank. And it formed a JV in June last year with China Minsheng Investment Capital to develop funds to invest in global property.
Asked where the next branch was likely to be, O’Connor said there were no immediate further plans, though he didn’t rule out more offices in future. “The platform we have now [once Shanghai is up and running] gives us a credible platform and pretty good regional coverage,” he noted.
“We’ve seen net capital outflows from Asian property assets for the past couple of years, but now we see a different trend happening, and that’s why we’re building the platform," added O'Connor. "We expect to see net inflows over the next few years.”