Singapore’s sovereign wealth fund GIC will be looking to increase its exposure to the UK property market particularly in commercial real estate. A state investment major, GIC is one of the wealthiest global state funds with its real estate arm owning properties across 40 countries, overseen by 150 employees in nine offices.
Spoken on the sidelines of the IPD/IPF Property Investment Conference, Goh expressed interest in increasing GIC’s holdings in London, given that the UK property market has become a focal point for global investors hunting for yield amid low interest rates.
London’s property sector has experienced sharp price increases, prompting some market watchers to warn of overheating in the market. Meanwhile, other analysts and industry observers have argued that an office shortage in London could continue to push rents higher in a seller’s market, reinforcing the market’s attractiveness.
This is despite the risk of a Brexit, as the UK intends to vote on leaving the European Union in a referendum planned before the end of 2017. GIC invests in real estate exclusively outside Singapore, as per its mandate. Goh commented: “Local for us is very much global. This can be an edge, and it can be a disadvantage.”
Initially investing in US properties 30 years ago, GIC has expanded its exposure and international footprint over the years, with about 50 per cent of its property portfolio holdings in Asia, with an approximate even split for the other half between the Americas and Europe, according to Goh. GIC is also considering property investments in Africa, although potential deals are yet to emerge.
Reasons cited for African properties becoming an attractive emerging market investment segment include a growing middle class population, better infrastructure and technological improvements in African nations that possess transparent real estate markets.
Recently, East Africa saw $800 million being infused into its property market, with two REITs and several private equity firms looking to invest in shopping malls, offices, hotels and industrial properties. This is convergent with Chinese investment in East Africa, as many East African coastal nations are part of the Maritime Silk Road and serve a significant role in the China-backed international infrastructure initiative.
It is expected to serve as an economic multiplier for South Africa and its eastern neighbours, with a network of maritime infrastructure taking shape in the Indo-Pacific. It will also link several states that are emerging as manufacturing centres for low-cost manufacturing as China progresses towards becoming an engineering centre, rather than manufacturing hub.
These investments, funded by China’s commitment to the Silk Road initiative, which has seen significant levels of capital commitment, have apparently contributed to and propelled the rise of African properties – East African properties in particular – as attractive domains for investment.
In relation to the potential impact of rising interest rates on global property markets, Goh noted the the market had been witnessing a “a huge run in property prices” due to prevailing low bond yields. While such an impact is still unknown, it is crucial for industry players to be mindful of the fact that interest rates will rise, according to Goh.