US$13.9 billion in Apac investments in North America, led by Singapore

Commercial transactions of Asia Pacific (Apac) to North America rose over 400% year-on-year in the period to US$13.9 billion ($18.6 billion) in the 1Q2023, which is the highest level ever recorded according to a study report from Knight Frank. The US was the country with the highest percentage of Apac outbound investment last quarter, with 58% and was followed by Canada with 27%.

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The rise in Apac capital flows into North America follows investor interest due to the faster price discovery in liquid and mature markets such as the US According to Christine Li, director of research for Asia-Pacific at Knight Frank. “In times of crises, US assets are often thought of as safe assets due to the stability of their currency,” she says.

In the group of Apac Investors, Singapore topped the list with regards to investments across North America, representing 89% of 1Q’s investment volume. GIC was the most significant investor, with a variety of deals that were made in the market, including the US$8.5 billion purchase of US REIT Store Capital and its US$3.3 billion acquisition of the Canadian Summit Income Industrial Reit. The latter transaction boosted Apac investing in Canada up to US$3.9 billion in the first quarter of 2023 which was a record in the history of Singapore capital outflows to Canada.

Other important Singapore investment opportunities throughout North America in 1Q2023 include City Developments, which made the US$468.2 million acquisition for the St Katherine’s Dock estate in London.

All in all, Knight Frank highlights that Asian sovereign wealth funds were the most dominant Apac outbound investments in the 1Q2023 period which accounted for 79% percent of total investment. Industrial and retail were the most heavily invested sectors in 1Q2023, generating the majority of 45% as well as forty% of the total investment volume, respectively. “We have observed an increase in demand for industrial and retail assets as a result of repricing opportunities in an environment of rising rates with a limited amount of competitors,” says the Knight Frank’s director Li.

Contrary to investments made in outbound markets the investment activity of Apac fell in Apac by 53.6% y-o-y in 1Q2023 The volume of quarterly transactions was the lowest level since 4Q2011. The decrease was caused by a broad decline across international and domestic investment sectors, according to Knight Frank.

Inside Apac, Singapore remained the sole market to see more investment volume y-o-y with an investment volume of US$4.3 billion in the 1Q2023 as compared to US$3.3 billion in the previous year. The increase was aided by the conclusion of the sale of a portfolio retail assets owned by Mercatus Co-Operative, a unit of NTUC Enterprise Co-operative.

In December of last year, Mercatus announced the sale of Jurong Point and Swing By @ Thomson Plaza for $2.16 billion to Hong Hong Kong-listed Link REIT. On January 1, Mercatus disclosed the transfer of 50% direct share in Nex the to Frasers Centrepoint Trust and Frasers Property for $652.5 million. The selling of its Mercatus group of investments was responsible for 50% of Singapore’s total investment volume, according to Knight Frank.

In Apac, Knight Frank highlights that investment in Seoul have fallen to their lowest levels since 1Q2015. The total transaction in the range of US$2.8 billion, which is an 80%. Additionally, in Japan the foreign investment were up, overall transactions dropped 17% over a period of time in 1Q2023. US$9.4 billion in the 1Q2023, in the wake of growing concerns about banks tightening their lending.

Yet, despite the fact that the volatility of the banking industry hinders capital investment in Apac, small adjustments to buyer expectations, as well as increased activity and liquidity in the latter half the year are encouraging according to Neil Brookes, global head of capital markets at Knight Frank. He says that asset repricing and the confidence in stabilizing the cost of debt will lead to increased demand from investors.

“Looking in the future, ultra-high net-worth investors, with their own objectives in investing and their ability to withstand financial stressors, are expected to play a key part in the deployment of capital as opposed to the institutional buyers, who are more affected by the high cost of capital” the author states.