EXPO: Expect Japanese investment in German real estate

The current influx of overseas capital targeting German real estate assets will continue in 2018, fueled in part by demand from Japanese investors, according to a panel at EXPO Real.

The current influx of overseas capital targeting German real estate assets will continue in 2018, fueled in part by demand from Japanese investors, according to a panel at EXPO Real.

The panel session titled ‘Germanomania – Will interest from international investors continue?’ featured Christian Ulbrich, global chief executive at JLL; Andrew Stainer, head of global asset management at AXA IM – Real Assets; Bruce Traversy, head of investments at Dream Global; and Kari Pitkin, managing director EMEA real estate at Bank of America Merrill Lynch.

The panellists were quizzed on a number of topics on the merits of the German real estate market, including favored cities, sectors and risk strategies, but the focus of the debate regularly homed in on the origin of the capital that has and will continue to target assets in the country.

Mounting interest in European real estate has been noted from Japanese investors

And while the panel were in disagreement about which cities and sectors they favoured, the quartet was unanimous in agreeing that Asian capital would be increasingly influential in Europe – and Germany in particular – in the months and years to come.

For Ulbrich, an emerging source of Asian capital was Japan. “We are seeing capital coming from absolutely everywhere. Hong Kong money has been very busy this year and the Koreans are actually buying and selling, as we have seen with the Sony Center deal this week,” he said. “But we have also seen increasing interest from Japanese investors. In my view, they will play a much more dominant role in European real estate. One factor is the J-REITs are now allowed to invest 50 percent abroad, which they previously were not able to do,” Ulbrich added.

Ulbrich said his firm was currently “right at the starting point of discussions with Japanese investors” and suggested the bigger players from Japan would most likely pursue a direct investment, while the smaller firms would probably look at funds.

Stainer also admitted that AXA – IM Real Assets had already made progress with investors from the region, conceding that his firm had already had “significant” discussions with one major Japanese investor about real estate investment in Europe, although he declined to provide further specifics.

Pitkin said she believed the overall wall of capital entering Germany would continue because of the sheer number of pension funds globally looking for assets to meet their liabilities. Many of these funds, Pitkin said, had real estate allocations of between 10 percent and 12 percent but were largely under-allocated at present.

Over the last six months two major Japanese pension funds, Government Pension Investment Fund and Chikyoren have made public moves to expand into real estate. In April, GPIF issued its first call for alternatives managers to invest in real estate funds of funds. While in July, Chikyoren appointed Invesco Asset Management as its real estate activities overseas.

The 2017 EXPO Real trade fair is being held at the Messe Munchen conference center in Munich, Germany, and runs from October 4 until October 6.

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