Apac investments in North America reach record US$13.9 bil in 1Q2023, led by Singapore investors: Knight Frank

Commercial transaction volumes from Asia Pacific (Apac) to North America rose over 400% y-o-y to US$13.9 billion ($18.6 billion) in 1Q2023, marking a new record high, according to a research report by Knight Frank. The US saw the highest proportion of Apac outbound investments last quarter at 58%, followed by Canada at 27%.

The surge in Apac capital outflows to North America follows investor interest driven by the more efficient price discovery in mature and liquid markets like the US, says Christine Li, head of research, Asia-Pacific, at Knight Frank. “In times of crisis, US assets are often seen as a safe haven given the currency stability,” she says.

Among Apac investors, Singapore topped the list in terms of investments in North America, representing 89% of 1Q investment volumes. GIC was the biggest investor, with multiple deals in the market including 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. The latter deal propelled Apac investments into Canada to US$3.9 billion in 1Q2023, a record high for Singapore capital outflows into the country.

Overall, Knight Frank highlights that Asian sovereign wealth funds dominated Apac outbound investments in 1Q2023, accounting for 79% of the total volume. The retail and industrial sectors were the most invested sectors in 1Q2023, making up 45% and 40% of the investment volume respectively. “We have seen an increased interest in retail and industrial assets due to repricing opportunities in a rising rate environment while there is limited competition,” says Knight Frank’s Li.

In contrast to outbound investments, investment activity in Apac decreased by 53.6% y-o-y in 1Q2023, with quarterly volumes hitting their lowest since 4Q2011. The drop was driven by broad-based declines across domestic and cross-border investments and sectors, says Knight Frank.

Within Apac, Singapore remained the only market to record higher investment volumes y-o-y, with a transaction volume totalling US$4.3 billion in 1Q2023, compared to US$3.3 billion the year before. The volume was supported by the completion of the sale of a portfolio of retail assets by Mercatus Co-operative, a unit of NTUC Enterprise Co-operative.

Last December, Mercatus announced the sale of Jurong Point and Swing By @ Thomson Plaza for $2.16 billion to Hong Kong-listed Link REIT. In January, Mercatus announced the sale of its 50% indirect stake in Nex to Frasers Centrepoint Trust and Frasers Property for $652.5 million. The sale of the Mercatus portfolio of assets accounted for half of Singapore’s investment volume, says Knight Frank.

Elsewhere in Apac, Knight Frank highlights that investments in Seoul hit their lowest level since 1Q2015 with a transaction volume of US$2.8 billion, or a y-o-y drop of 80%. Meanwhile, in Japan, while foreign investments rose, overall transaction volume fell 17% y-o-y to US$9.4 billion in 1Q2023, amid growing concern over the tightening of financing by banks.

Nonetheless, while the banking sector’s volatility continues to impede capital deployment in Apac, gradual adjustments in seller expectations and increased liquidity and activity in the latter half of the year offer hope, says Neil Brookes, global head of capital markets at Knight Frank. He maintains that asset repricing and confidence in stabilising debt costs will result in increased investor demand.

“Looking ahead, ultra-high-net-worth investors, with their unique investment goals and resilience to financial headwinds, are expected to play a pivotal role in capital deployment, in contrast to institutional buyers who are still impacted by a higher cost of capital,” he says.