Global Opportunity & Insights for Evolving World of CRE

July 13, 2023

Recently, Berkadia’s own Dori Nolan, Chinmay Bhatt, and Matthew Tu had the opportunity to visit investors in Hong Kong and Singapore alongside our strategic partners at Knight Frank.

Pictured from left to right: Neil Brookes, Dori Nolan, Chinmay Bhatt, Matthew Tu

Traveling overseas is something we seek to do often because it provides us with up-to-date insights into the global investment landscape. Additionally, leveraging our alliance with Knight Frank – who boasts deep relationships with investors across Asia – grants us unparalleled access to international capital sources, further enhancing our awareness and ability to inform clients on investment themes and trends we are witnessing around the globe.

Through our strategic alliance with Knight Frank, we are able to leverage relationships and learn who is active and inactive in today’s market, what challenges and opportunities exist, and analyze different investment strategies and sectors on a global scale.

Dynamic Activities and Invaluable Market Insights

Currently, both Singapore and Hong Kong are vibrant hubs of investment. Singapore has experienced a notable surge in the number of family offices and private capital providers in the past few years and in both Hong Kong and Singapore, commercial real estate is still trading very aggressively at four percent cap rates and below.

Singapore has been granting enticing incentives to private capital groups and family offices, including the option for low or even zero capital gains tax. As an example relevant to the US, by establishing the right structure and seeking advice from accounting/tax consultants, family offices can completely avoid capital gains tax for U.S. public equities exposure in Singapore. Taking note of Singapore’s success in attracting capital, Hong Kong has followed suit by offering similar benefits for private capital and family offices.

Another noteworthy insight gained from our recent trip was related to the increased cost of living over the last few years in both Singapore and Hong Kong. Residential rents in Singapore have experienced a dramatic increase of approximately 44 percent since 2019, with Hong Kong also seeing an increase of around eight percent. To address the housing crisis, Singapore recently passed a tax measure that doubled the stamp tax for certain types of buyers to 60 percent, making it more costly for foreigners to acquire real estate.

Diversifying Investment Horizons: A Spotlight on Asset Classes

For the most part, Asia-Pacific (APAC) investors have a keen interest for U.S. real estate due to its relative stability and ability to generate attractive risk-adjusted returns. They view the current market environment as an opportune time to deploy capital as larger U.S. institutional investors are sidelined.

During our trip, the U.S. office sector garnered significant attention, with groups posing various questions, having seen an abundance of news and reports about factors such as low occupancy rates and upcoming debt maturities.

Generally, APAC investors are steadily interested in increasing their living sectors exposure in the U.S. “Niche” asset classes within the living sectors, including co-living, student, and seniors housing as especially interesting to APAC investors as they search for yield.

More specifically, student housing is a focus for many groups largely due to investors’ familiarity with the sector in their local or regional markets, prior attendance at graduate or undergraduate programs in the U.S. or UK or having children who have gone through the higher education system abroad.

While some capital groups may have already invested or are familiar in the U.S. multifamily market, others are relatively new to the sector as it is not as prevalent in their local or regional markets. There is an opportunity to provide education on the multifamily sector in the U.S. so capital groups feel more comfortable investing in the future and realize the opportunity for attractive, long-term returns.

Navigating International Markets for Long-Term Investor Success

Having the opportunity to converse with a diverse range of investors, we have gained a comprehensive understanding of their perspectives. Focusing efforts on creating, growing, and maintaining relationships with international investors is a key priority for U.S.-based investors of ours. Staying aware and informed of what is happening around the globe provides investors with an opportunity to stay ahead of the curve, better navigate the challenges of a cooling domestic market, and position themselves for long-term success.

Berkadia’s alliance with Knight Frank offers Berkadia’s clients unmatched access to domestic and internationally based capital to maximize their investments. The alliance provides clients with greater connectivity to the world’s most active investors, and capital sources.

Dori Nolan, Senior Vice President – Institutional Solutions, Chinmay Bhatt, Senior Managing Director , Matthew Tu, Associate Director