Asian family offices have a long history of investing in prime global real estate. But with investment strategies facing a number of challenges, from the geopolitical backdrop to an increasingly complex regulatory environment, how service providers support their clients is evolving. As part of our ‘Real Estate from a New Perspective’ series, Sebastian Turner, Managing Director, Hong Kong, at Suntera Global looks at how outside influences are prompting a fresh approach…
Q: What key factors are driving the sustained interest of Asian family offices in prime real estate opportunities globally?
The prime real estate market provides a blend of security, diversification, and potential growth, and that aligns well with the growth objectives of Asian family offices. Consequently, investment – especially in the major western markets – is likely to continue, driven by several key factors.
Firstly, we are seeing many family offices looking to diversify their investment strategies, with prime real estate offering a tangible asset class that offsets some of the risks associated with traditional investments like stocks and bonds.
Globalisation and mobility too are proving influential, with a desire for ‘interconnectivity’ prompting some family offices to seek properties in key international markets that can serve as luxury residences or investment properties. Meanwhile, greater cross-border regulatory clarity in many western markets is proving compelling where Asian families are looking for certainty.
Other trends, such as greater urbanisation and the rise of alternative assets, are also making their mark with families exploring real estate opportunities in hospitality, logistics and mixed-use developments. The traditional motivations for prime real estate investment still carry weight, however, and many families continue to see bricks and mortar as fundamental to long-term wealth preservation.
Q: How do cultural, economic and generational differences across Asian countries influence investment strategies?
The short answer is – significantly. Differences in cultures often account for varying tolerances to risk. For instance, Japanese family offices may prefer conservative investments due to a cultural inclination towards stability, while those from typically dynamic economies, like Singapore, may have a higher risk appetite and opt for short-term, start-up opportunities.
From an economic perspective, wealthy families in the region are taking care to consider currency and financial stability – especially regarding emerging economies – before pledging any investment.
Meanwhile, generational views on wealth are also highly influential, with older family members typically prioritising wealth preservation and family legacy in contrast to a younger generation geared towards technology, social and environmental investments. Notably, this new cohort of wealth leaders stands to shift growth from the traditional asset classes, broadening investment into new markets and sectors.
Q: What trends are emerging in the types of real estate assets Asian investors are targeting?
There are a number of key emerging trends here. Luxury residential investment in major global hubs like London, New York and Sydney continue to be sought after under the premise that values will appreciate over time.
Meanwhile commercial real estate, especially that which accommodates co- and hybrid working models, is proving attractive, while mixed-use developments that can support living, commercial and retail spaces are offering diversified income streams.
In addition, the growth of e-commerce has led to a greater interest in logistics and industrial properties, while the global shift towards digitalisation is driving greater investment in data centres and technology-driven assets. Sociological factors too are influencing investment decisions, with ageing populations and a return to pre-Covid travel levels both shaping investment considerations.
And regional diversification is also playing a part, with investments in property off the beaten track – often offering higher growth potential – proving compelling. Such trends highlight a dynamic shift in the focus of Asian investors towards a varied mix of real estate assets that can provide stability, growth and income while also reflecting changing global economic conditions and consumer preferences.
Q: How have geopolitical developments and regulatory changes impacted the flow of capital into prime real estate markets?
From a regulatory perspective, several Asian countries – most notably China – have introduced capital controls to curb the outflow of money, while Western countries including Canada, the US and Australia, have heightened restrictions on foreign investments to curtail market inflation and address national security concerns.
Regional conflicts in Asia itself have also prompted greater interest in outbound investments into mature, stable markets. Economic and trade agreements, coupled with market conditions – including currency fluctuations – are further impacting decisions.
And importantly, the twin agitators of sustainability and technology are also being felt; environmental credentials are increasingly key requirements while technology is advancing remote transacting capabilities.
Q: What are the most significant risks and opportunities that you foresee for investors in the prime real estate market over the next few years?
Regulatory and compliance requirements – changes to tax laws, foreign ownership restrictions and anti-money laundering regulations to name but a few – can present challenges, but tailored compliance and advisory services can support families to remain compliant across multiple jurisdictions.
Geopolitical instability, market volatility and economic uncertainty will also continue to play a big part, and it’s important that investors look to mitigate these issues through risk analysis, diversification strategies, portfolio stress testing and asset allocation advice.
Despite the hurdles, though, there are still plenty of opportunities on the horizon. For example, technology is revolutionising the real estate sector, providing new investment possibilities in the form of smart buildings and data analytics-driven property management, while the drive towards greater ESG principles is creating new sustainable avenues. And the higher growth potential of emerging market investment is also driving fresh approaches.
Meeting the needs of such evolving strategies will be vital for quality service providers. Only those able to provide integrated services and sophisticated technology and analytics platforms, combined with global expertise and local insight, will be worthy of a seat at the table.
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Key Contact:
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Sebastian Turner
DIRECTOR, MANAGING DIRECTOR OF SUNTERA HONG KONG
