The US has become the top destination for Asian outbound commercial real estate investment, putting additional pressure on US lenders as their Asian counterparts increasingly look to carve out their own deals.
Asian cross-border commercial real estate investment reached $8.6bn in Q1, the strongest Q1 performance since major Asian outflows began in 2013, according to a report from CBRE.
In a break from the historical norm, Asian investment into the US eclipsed investment into Europe: US volume increased from $1.6bn in Q1 2014 to $3.3bn in Q1 2015, while European volume rose from $1.7bn to $2.5bn.
“The net effect of more capital coming in is an increasingly competitive environment for lenders ,” Brian Stoffers, global president of debt & structured finance with CBRE, told Real Estate Capital.
While some Asian investors are boldly paying all cash for some high-profile US assets (one recent example being Chinese insurer Anbang’s purchase of the Waldorf Astoria in Manhattan), others have relied on Asian corporate debt as well as bank loans from both Asian and US lenders, Stoffers said.
But while Chinese and Japanese bank lenders have historically been “very picky” when it comes to selecting investments, they are becoming much more comfortable with the US markets; meaning that, much like their counterparts on the acquisition side, they are looking to break away from syndicate structures led by US banks.
“Typically they have been participating in financings led by US banks,” Stoffers said. “But many of the [Asian] banks want to increase exposure, so they might do that on the first three or four deals to learn the process” before choosing to go it alone.
The surge in Asian outbound investment and US real estate is in line with another CBRE report, the 2015 Asia Pacific Investor Intentions Survey: 32% of respondents said the intended to deploy capital outside of the region, and 12% expected to spend more this year than in 2014.
Asian cross-border commercial real estate investment reached $6.3bn in Q1 of 2014.