Inflow of Asian capital fuels competition

Asian investors are increasingly active on the Dutch property market, according to the Capital Markets Outlook 2015 by property advisor CBRE. According to Machiel Wolters, Director Research and Consulting at CBRE it concerns investors from countries such as Japan and Singapore, but also from China, Malaysia and South Korea. “Their interest is no longer confined to the exploratory stage, but has already resulted in the first actual offers. As such, it seems a matter of time before the first major acquisition by an Asian investor will become a fact.”

CBRE sees Asian capital flowing into the Dutch market for some time now, although this generally concerned indirect investments. By participating in Dutch funds or through international asset managers, separate accounts and joint ventures, Asian institutional investors are active in the market without being responsible for managing the final transaction.

Also in Asia the pressure on capital is mounting. This is caused by both the influx of more pension and insurance capital and the increasing allocation to real estate. Machiel Wolters: “By comparison, while Anglo-Saxon funds generally allocate 5% of their assets under management to real estate, for Asian funds this moves around 2%. Additionally, Asian investors perceive the risk-return profile of the European ‘core’ product as rather favourable. Their market entry will expand the international playing field, which is likely to fuel competition in the Dutch market.”

This development is also visible in the debt market. In line with investors’ preferences, lending against secondary products is becoming easier, which translates into higher LTVs and more competitive margins.