Singapore has overtaken China to become the biggest source of outbound capital in Asia-Pacific, investing $21.8 billion in cross-border real estate deals in the year to 31 March 2019, according to a report by commercial real estate services firm Knight Frank.

This is a 23 percent increase from the same period last year and Knight Frank estimates the city-state will continue to be a major source of cross-border capital in 2019. Singaporean investors have already invested $4 billion into China, South Korea, the UK and Australia in the first quarter of this year.

The growth is mainly driven by several domestic developer-managers diversifying their footprint beyond Asia, according to Neil Brookes, Asia-Pacific head of capital markets at Knight Frank. He explained that groups like CapitaLand have accumulated a big real estate exposure in China and diversification into the US and Europe is now seen as an important defensive strategy for their portfolios.

The report also points out that sectors such as student accommodation have attracted high volumes of cross-border investment from Singaporean, and other Asian, investors. For example, Singaporean media group Singapore Press Holdings purchased £133.7 million-worth ($169.5 million; €150.5 million) of student property assets in the UK this April. In 2017, Temasek-backed Mapletree Investments introduced Mapletree Global Student Accommodation Private Trust, which invests in assets in the UK and US. In total, the UK student property sector has seen a 47 percent increase in investment from Asia-Pacific investors over the last five years, according to the report.

“For groups like Mapletree, buying into those sectors will give them a natural hedge on their retail or office portfolios in Asia. This also allows them to understand the markets and potentially expand them into Asia over the next few years,” said Brookes.

Brookes also told PERE that as these developer-managers grow their AUM, they would need to look for opportunities in the US and UK as well. For example, Mapletree is planning to execute S$10 billion ($7 billion; €6.5 billion) of deals as it seeks to set up more private funds over the next five years, according to a Bloomberg report.

Meanwhile, China, once Asia’s biggest source of outbound capital, has recorded a 83 percent drop from $34.5 billion to $5.7 billion in the 12 months ending 31 March, 2019, according to the report. The sharp decline is largely due to continuing capital control imposed by the government to restrict money going offshore.