Asian investors are looking to buy commercial real estate in the U.S.
This is taken from an article in the wall street journal. It’s only natural to assume they will start looking to us for better yields.
“Commercial real-estate yields in Asia are the lowest in the world, forcing investors to pay top prices for the highest-quality buildings, take on more risk or consider property investments outside of their regions for the first time.
Yields for centrally located office buildings are just 2.2% in Taipei, 2.8% in Hong Kong and 3.5% in Tokyo and Singapore. By comparison, they are 4.7% in New York and 3.8% in London’s West End, according to CBRE Group Inc. CBG +0.13%
Pension funds, sovereign-wealth funds and other institutional investors have been willing to accept such low returns because they look attractive in a low interest-rate environment. But it also means that buyers are exposed to a loss in value if interest rates rise and demand for such low yields cools.
Yields have fallen so far in Taiwan that financial regulators last year instituted a new rule that limits domestic insurance companies’ investments to properties that offer a rental yield of 2.875% or above. Authorities also have allowed insurance companies to buy real estate outside the country’s borders for the first time.
Investors are modifying their strategies. Terence Loh, executive director at China-focused investment fund CDH Investments, said he has been investing in development projects in cities such as Beijing, Hangzhou and Xi’an rather than buying existing buildings. “The risk-reward is more compelling,” he said.
In some Asian cities, including Taipei and Beijing, yields are at or near historical lows, according to CBRE. In Hong Kong, they are at similar levels to the last major property boom in 1997. In Tokyo, the yields are at their lowest levels since 2005, CBRE says.”
Investors have started to leave their comfort zones to find higher yields. Some have targeted Australia. Yields are at 6% in Sydney’s and Melbourne’s main office districts