Asia and Europe: Markets in urban transitions

October 22, 2019

Two back-to-back panels explored the relationship between the Asia/Pacific and Europe/USA regions on EXPO REAL Tuesday and heard from both sides: In the first panel, which was moderated by David Green-Morgan (Managing Director Asia Pacific Real Capital Analytics, Singapore), Asia experts discussed investment strategies from the point of view of returns and risk. Afterwards, experts on European investments discussed whether Asian investors are only looking for core investments in Europe, or whether they are also open to alternatives.

Asia-Pacific: Large differences between markets

In both panels, it became clear that Asia-Pacific is just as heterogeneous as Europe.

While Japan and Australia, for example, are on a par with the West in terms of transparency, international market standards and environmental protection, China and India are typical emerging markets with inherent risks, similar to Russia and Brazil. No wonder Eric Cheah (Head of Investment Union Investment Real Estate Asia Pacific) found that German investors are particularly drawn to Australia as an investment location. Lee Timmins (CEO Eurasio Region Hines) observed that the Indian market represents more of a challenge, especially as contract risks are a factor that should not be underestimated.

© shutterstock / Sean Pavone
When it comes to urban development, Asian end Western regions are facing equal challenges.

Against these risks, there are opportunities arising from the significant growth of SMEs, the resulting increase in private consumption and the strong economic growth in these regions. The prevailing investment styles reflect this: opportunistic and, if necessary, as co-investors in defensive strategies, with more risk appetite, for example, in logistics properties in China. Environmental protection and sustainable real estate are part of the discussion. China in particular has understood that the dynamic growth of cities can only be managed on a political level. As a centralist state, China naturally finds it easier to implement the necessary measures than, for example, India, concluded Lee Timmins.

Europe is essential for diversifying the assets of Asian investors

Conversely, just a few years ago, Europe was almost terra incognita for investors from Asia. Shinji Kawano (Head of Overseas Property Investment, Tokyo Marine Asset Management) recalls how Japanese investors needed to learn that international investments cannot be managed from Tokyo, but rely on partnerships with local managers. Aaron Min (Senior General Manager, Global Investment Banking, Hana Financial Investment) observed that Korean investors used to prefer direct investments in Europe, but are now moving to specialized funds and alternative assets due to the pressure on returns.

Whether Asia or Europe: The central question for the future is how urban spaces are designed

Europe is an important market for Asian investors to diversify their portfolios and offset their dollar investments. The same fundamental changes have to be managed worldwide: the way we live and work is changing. David Rendall (Chief Executive of La Française Real Estate) pointed out that the importance of urban infrastructure is growing. Transportation-related issues in particular can butt heads with growth expectations. This is why mixed-use developments are becoming increasingly important – working, living, learning and care must be interlinked if cities are to be livable in the future. This closes the circle on one of the defining themes of this year’s EXPO REAL—the question of how urban living space can be created and managed in the future.

Stephanie von Keudell

Independent journalist