Of all the jurisdictions providing the capital into North American commercial real estate, Singapore was way ahead of the rest.

Commercial property transaction volumes from Asia-Pacific into North America surged by more than 400 per cent year-on-year reaching $13.9 billion in the first quarter of 2023, according to Knight Frank’s Asia-Pacific research team. By contrast, domestic investment into Asian commercial property fell.

Outbound investments from APAC into North America made up 85 per cent of the total investment volumes outside the APAC region, showing how the continent is attracting the lion’s share of such flows from Asia.

Singapore capital accounted for a whopping 89 per cent of the Q1 investment volumes, driven by M&A deals by GIC, the Singaporean sovereign wealth fund. In another record, outbound capital from Singapore into Canada reached $3.9 billion – a record for Singapore Capital into Canada. Japan is the next largest investor into North America, albeit, lagging Singapore significantly. Japanese investments into the US reached $1.1 billion in Q1 2023, which is the highest amount since Q1 2017, Knight Frank said in a report issued this week.

APAC investors' interest in outbound opportunities is fuelled by the more efficient price discovery in mature and liquid markets such as the US. "In times of crisis, US assets are often seen as a safe haven given the currency stability,” Christine Li, head of research, Asia-Pacific at Knight Frank, said. “We have also seen an increased interest in retail and industrial assets due to repricing opportunities in a rising rate environment while there is limited competition. As the Federal Reserve's rate hike cycle approaches its conclusion, we anticipate further activity in the latter half of 2023."

In drastic contrast to APAC’s outbound investments, Q1 APAC investment activity in 2023 plummeted 53.6 per cent year-on-year, with quarterly volumes hitting the lowest since the fourth quarter of 2011. This drop was driven by broad-based declines across domestic/cross-border investments and sectors. Transactions for retail properties rose on the deal for Mercatus’ portfolio, but overall investment volumes fell significantly.

Singapore remained the only market to record higher volumes, with a transaction volume of $4.3 billion.

Investments in Seoul also hit their lowest level since the first quarter of 2015, with a transaction volume of $2.8 billion, representing an almost 80 per cent drop compared with Q1 2022.

Whilst foreign investments in Japan continued to rise, momentum is losing steam. The transaction volume in Q1 2023 was $9.4 billion, over 30 per cent below the Q1 average of 2017 to 2021, amid growing concerns that the economy could weaken more than expected if banks tightened financing, which would erode demand for real estate.

“The banking sector's volatility continues to impede capital deployment in APAC, but gradual adjustments in seller expectations and increased liquidity and activity in the latter half of the year offer hope,” Neil Brookes, global head of capital markets at Knight Frank said. “Asset repricing and confidence on stabilising debt costs will result in increased investor demand. Looking ahead, ultra-high net worth investors, with their unique investment goals and resilience to financial headwinds, are expected to play a pivotal role in capital deployment, in contrast to institutional buyers who are still impacted by a higher cost of capital.”