Western Capital shifts to Japan and India as purchasing in Mainland China slows

Japan remains the top market for Western investors in APAC while China hits a 10-year low.

Japan and India emerged as the favored destinations for Western investors in the Asia-Pacific region, collectively capturing a substantial 60% share of capital inflows in 2022. In contrast, Western capital in mainland China experienced a significant downturn, reaching a 10-year low of only US$500m.

CBRE Report Figures revealed that Japan remains the top market in the Asia Pacific as buyers from the region are drawn to its positive carry, seeking markets that offer favorable returns. Likewise, India saw a remarkable investment increase of 80% YoY, reaching a total of US$2.8b. India was the only market in the region to gain as much capital inflows during the same period.

The report attributes the impressive returns to the active participation of Western investors in India. Notably, the Blackstone-sponsored Nexus Select Trust acquired the Select Citywalk Mall in Delhi for US$544m. This asset is set to be included in Nexus Select Trust's inaugural retail REIT IPO in India in May, aiming to raise INR32b (US$391m).

In their pursuit of accessing the Indian market, several investors formed joint ventures with local players in 2022. Notable examples include CPPIB partnering with Tata Realty and Brookfield, which acquired a 51% stake in Bharti Enterprises' commercial properties.

In contrast, Western investment in mainland China experienced a sharp decline. Geopolitical tensions and the prolonged zero-COVID policy implemented by the country were key factors that deterred buyers from the country as they constrained international investors' ability to perform site inspections and conduct due diligence.

Despite the lifting of anti-pandemic restrictions in January 2023, experts anticipate a gradual return of Western capital to mainland China. But the elevated geopolitical tension in the region, coupled with a weakened market, may still influence investor confidence. Experts believe Western investors are likely to proceed with caution when considering opportunities in mainland China, further prolonging the recovery of its investment landscape.