OVERSEAS institutional investors have spent 19.7 billion yuan (US$2.56 billion) on en-bloc acquisitions in Shanghai over the last three years, according to a recently-released report by CB Richard Ellis.

The positive mood among these investors in local property acquisitions did not seem to have diminished in the first quarter of this year as 3.8 billion yuan worth of deals were recorded despite the Chinese government's various measures to cool the market and to quell speculation.

Even the focus of investments has changed over the three years as the institutional investors sought opportunities to acquire income-producing properties in various sectors, unlike prior to 2004 when local investors targeted on investing in development of residential properties for sale, the global real estate service provider said.

The increased participation of overseas investors has led to the emergence of several key investment themes.

Firstly, there has been a notable surge in institutional involvement in the city's real estate market, with increasingly diversified sources of funding and more institutions from the United States, Europe, Australia, Asia and the Middle East.

In particular, European investors have become more aggressive in acquiring assets in the city since 2006.

Grosvenor, a UK property investment firm, recently entered the city when it acquired the Vienna Plaza serviced apartment building in Gubei in Changning District. Earlier in 2006, Germany's SEB Immobilien-Investment GmbH acquired Platinum Tower, following the footsteps of other German investors such as Deutsche Bank and DIFA.

Secondly, given the difficulty of acquiring core location institutional grade buildings, investors are seen exhibiting stronger interest in buying suburban properties - mainly industrial - and poorly positioned or badly leased properties that have a potential for a huge rise in rental via repositioning or redevelopment.