The Role of Private Equity in Real Estate Markets in Asia Pacific

The Role of Private Equity in Real
Estate Markets in Asia Pacific

• The private equity share of real estate
transactions in Asia Pacific is approximately
11%
• Of the future money raised to be deployed, the
bulk will head for China
• The most liquid markets in Asia Pacific are
Hong Kong and Singapore
• Australia will continue to be a sought after
destination for private equity capital with
the rise of private equity funds in real estate
markets.
This report takes a look at their activity in Asia
Pacific over the last four years to answer the
following questions:
• How much private equity raised will be
allocated to Asia Pacific real estate?
• Where will each fund spend this money?
• What does this tell us about the future
deployment of the capital currently being
raised?

Matching capital raised to capital spent
The data for capital raised and capital spent is
well matched in Australia, which is not surprising
because according to Jones Lang LaSalle's Global
Real Estate Transparency Index 2010, Australia
is the world's most transparent real estate market.
For Hong Kong, more equity was raised than was
spent, while the converse was true in Singapore.

This highlights the fact that, for investors, the two
cities may be a substitute for each other, meaning
if a fund is unable to secure assets at attractive
prices in one market, then that capital is deployed
in the other. The mismatch between funds raised
and spent in these markets over the past few
years, may be indicative of the rapid escalation in
capital values seen in Hong Kong’s recovery.
Japan, which has the biggest market overall, had
a rough match against our estimate of USD 19.8
billion raised against USD 22.0 billion spent. As
the largest market in the region, Japan attracts
a considerable share of global and pan-regional
funds, partly accounting for the excess in funds
spent over the period analysed.

The country that did not match up well in our
analysis was China. It was estimated that countryspecific
funds plus China’s allocation from global
and regional funds would provide about USD
20.0 billion for deployment, but our records on
investment by private equity players show direct
transactions completed in commercial real estate
was in the order of just USD 3.4 billion.

To establish where the rest of the money may
have gone, land and residential transactions by
these 175 funds in China were examined and
refined, with the assistance of our local market
experts and using the data from Real Capital
Analytics. USD 4.9 billion of land transactions
and USD 800 million of residential transactions

READ MORE CLICK HERE