Apac investments in North America reach record high of US$13.9 bil, led by Singapore: Knight Frank

business in Asia-Pacific

Asia Pacific (Apac) outbound investments into North America reached a record high in 1Q2023, with commercial transaction volumes surging by over 400% year-on-year to US$13.9 billion ($18.6 billion). A research report by Knight Frank revealed that out of the total volume, the US received the highest proportion at 58%, with Canada coming in second at 27%.

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Singapore was the biggest Apac investor, accounting for 89% of Apac outflows to North America. GIC had multiple deals in the market, including the US$8.5 billion invested in US REIT Store Capital and its US$3.3 billion purchase of Canada’s Summit Income Industrial Reit – the latter inflating Singapore capital outflows into Canada to an all-time high of US$3.9 billion.

Christine Li, head of research, Asia-Pacific, at Knight Frank, attributes the surge to investor interest driven by the efficiency of price discovery in established and liquid markets such as the US. “In times of crisis, US assets are often seen as a safe haven given the currency stability,” she notes.

Asian sovereign wealth funds largely dominated Apac outbound investments, according to Knight Frank, with their share of total volumes in 1Q2023 amounting to 79%. Retail and industrial assets were the most invested sectors, together accounting for 85% of investment volume.

Li suggests that the increased demand for retail and industrial assets is due to opportunities for repricing in a rising rate environment, combined with less competition.

While outbound investments from Apac to North America was soaring, investments within Apac were quite the opposite. Total volumes in 1Q2023 decreased by 53.6% year-on-year – the lowest since 4Q2011. All markets in the region witnessed a drop in investment activity, with the exception of Singapore.

Transaction volumes in Singapore rose to US$4.3 billion in 1Q2023, compared to US$3.3 billion the year prior. This was mainly due to the Mercatus Co-Operative’s sale of a portfolio of retail assets, which accounted for half of the total investment volume in Singapore.

On the other hand, investments in Seoul nosedived by 80% year-on-year, reaching its lowest level since 1Q2015 with a transaction volume of US$2.8 billion. Japan’s foreign investments rose, but overall transaction volume still dipped 17% y-o-y to US$9.4 billion.

The banking sector’s instability continues to impede capital deployment in Apac, but Neil Brookes, global head of capital markets at Knight Frank, is hopeful that gradual adjustments in seller expectations and increased liquidity and activity in the second half of the year will lead to increased investor demand.

According to Brookes, ultra-high-net-worth investors with their unique investment goals and resilient to financial headwinds are expected to play a vital role in capital deployment, replacing institutional buyers who are affected by the higher cost of capital.