Here in the U.S., we've witnessed the power and capability Chinese groups have wielded in regard to commercial real estate. (See Waldorf Astoria; see Baccarat Hotel.) And while their influence is surely not going anywhere, they (China and Asian groups, in general) are also looking for other locations to deploy capital. And the next frontier could be Russia, according to reports.
Analysts at CBRE say that Asian investors may increase their investment in Russia’s real estate market to $500 million in 2015 versus $445 million in 2014—an increase of approximately 12 percent.
"Asian investors did not show noticeable systemic activity on the Russian commercial real estate market until 2014," the report said. "Closure of Western capital markets for Russian companies forced government and corporates to strengthen Eastern direction of development. These efforts brought their results and led to increasing interest of Asian investors to the Russian market," CBRE said, and as reported by Russia & India Report.
In 2014, sovereign wealth fund Qatar Investment Authority made the largest buy when it acquired the Pokrovsky Hills Complex in Moscow for $400 million.
However, the amount of investment will depend directly on Russia's stability, which is tenuous right now.
"The volume of Middle Eastern and Asian investments into Russia’s commercial real estate market in 2015 will strongly depend on how fast the country’s financial market stabilizes. We could expect rather restrained decisions from investors in a situation when credit interest rates in rubles exceed 20 percent, while Eurobonds yields total 6 percent. Guarantees to foreign investors provided at the governmental level may somehow improve the situation in this context," Anna Melnik, head of capital markets research, CBRE, Russia, said.
While China will have its turn, in 2015, expectations are that Korean investors will increase their activity in Russia the most. Take for instance South Korea's Lotte Group, which earlier this year acquired a hotel project nearby Isaakievskiy Square in Saint Petersburg for around 1.6 billion rubles (US$25.5 million), while additional investments in the project might exceed US$15.9 million, CBRE said.
In sum, Asian investors deployed a total of $40 billion into international commercial real estate in 2014, a rise of 23 percent year on year, CBRE said.
EMEA reportedly remains the largest destination for Asian outbound investment, attracting $13.7 billion capital from the region in 2014.
Across the board, Asian investment came largest from Singapore, followed by China and Hong Kong, CBRE said. Taiwanese and Chinese insurers grew their international real estate investment activities, by 770 percent and 310 percent respectively in the year.