Real estate investors are increasingly planning to raise their exposure to Asian real estate markets in general, and non-listed real estate funds in particular, over the next two years, according to the first major survey conducted jointly by Inrev, the Amsterdam-based European Association for Investors in Non-listed Real Estate Vehicles, and Area, the Asian Real Estate Association.

The Inrev/Area Investment Intentions Asia Survey was based on responses from 30 fund managers, 21 institutional investors and 14 fund of funds managers, of which around 50 per cent were Inrev members and 26 per cent Area members. Most respondents were based in Europe (71 per cent), 17 per cent based in the US and 12 per cent in Asia.

'Real estate investors clearly view Asia as the market of the future, given the diverse range of opportunities they see in the market, with Japanese offices being the top pick for 2008 followed by Chinese residential,' says Nick Loup, co-director of Area and managing director of Grosvenor Asia Pacific.

'Japan is clearly one of the more established markets with institutional quality stock, while China is a developing market with a private housing sector that has been growing rapidly.'

Inrev chief executive Lisette van Doorn says: 'The investors that responded to the survey are clearly focused on non-listed funds, which account for 85 per cent of their holdings in Asia, with access to expert management being the main reason for investing in these funds. However, lack of transparency and current market conditions are hampering investment in non-listed Asian real estate funds.'

Inrev says many European investors are keen to access Asia's growth opportunities as well as recognising the diversification benefits of a global approach to their real estate strategy. Both Inrev and Area believe it would be most useful to co-operate§, considering the overlapping goals related to Asian non-listed real estate funds.

Survey respondents feel that the credit crunch is impacting the Asian real estate market through more limited availability of debt and the potential repricing of real estate assets. However, overall they expect the effects of the credit crunch to be less than in Europe or the US.

Some respondents believe the financial crisis might even turn out to be positive for the region, if more capital that was originally allocated to other markets is diverted toward Asian real estate.

'In terms of investment styles, the results turned out to be quite surprising,' Loup says. 'Investors indicated a considerable preference for core funds (40 per cent), with the remainder split evenly between value-added and opportunity fund styles.

'Anecdotal market evidence seems to indicate that investors are generally more focused on value-added and opportunity funds, which is supported by the general character of Asia as a region of emerging markets.'

Adds van Doorn: 'Fund of funds managers are exclusively focusing on value-added and opportunistic strategies. Fund managers increasingly emphasise these higher risk strategies going forward.'

Inrev was launched in May 2003 to act for investors and other participants in the growing non-listed real estate vehicles sector. It currently has 303 members drawn from leading institutional investors, fund managers, promoters and advisors within and outside Europe, including 47 institutions with real estate assets under management exceeding EUR133.5bn.

Area brings together investors in privately-held real estate vehicles in Asia with property companies, lenders and advisory firms.