Real estate investment activity in Asia-Pacific to outperform Europe and Americas in 2020-2021: JLL

/ EdgeProp Singapore |

December 17, 2019 5:14 PM SGT

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SINGAPORE (EDGEPROP) - Global real estate transaction volumes are expected to stay elevated over the next two years, and the Asia-Pacific region is set to outperform Europe and the Americas with an outsized portion of global investor interest, says international real estate consultancy JLL.

Investment in Asia-Pacific real estate reached US$125 billion ($169.4 billion) in the first three quarters this year, increasing 10% y-o-y and setting the stage for another strong year ahead. Foreign investment into Asia-Pacific real estate is at a decade high taking up 35% of total volumes.

Stuart Crow, CEO of capital markets, Asia Pacific, at JLL, says: “Real estate in Asia-Pacific has gained favour in the last year as investors continue to seek high yields and stability amid a climate of geopolitical uncertainty and slowing economic growth. As an increasing amount of capital is being allocated to real estate, we’re seeing more clients making larger-scale investments to expand their portfolios.”

Investor appetite for logistics assets is climbing but these facilities are also tightly held. Thus, more investors are forming joint ventures with major established players and taking partial stakes, or even going into public markets. An example is Canadian pension fund OMERS investment in ESR logistics platform when the latter filed to be listed on Hong Kong’s stock exchange, says Crow.

Alternatively, mergers and acquisitions open the way to accessing quality portfolios, such as warehouse operator GLP, Viva Industrial REIT, and Propertylink REIT among some of the larger platforms that could be acquired.

Foreign investment into Asia-Pacific real estate is at a decade high taking up 35% of total volumes. (Picture: Singapore's skyline and Chinatown area/Samuel Isaac Chua/The Edge Singapore)

Reits in Asia-Pacific also raised a record amount of capital this year at US$14 billion, surpassing the last record of US$13.8 billion in 2013. JLL expects that Singapore and India will see more REIT initial public offerings in 2020, driven by their focused growth strategies and consistent trading performance. Strategic mergers and acquisitions will also enable funds to grow geographically and deepen their investments in the US and Europe. However, JLL also expects more consolidation within the sector in the future.

Crow says: “Governments in [Asia-Pacific] are sustainability conscious and proactive in transforming their cities to make them smarter and more livable. These initiatives present opportunities for astute real estate investors, either by acquiring or developing sustainable assets, or being a part of the city redevelopment process.”

Recently Singapore-listed Keppel REIT obtained a green loan facility to grow its green building portfolio. The city-state has also started to decentralise its CBD, redevelop older buildings into mixed-use developments, and reduced the use of private transport. In Beijing, the city has reduced the size of commercial developments in the central area, while targeting to reduce the urban population in its six central districts by about 15%.

Technology firms will play a bigger role in driving up rents for premium offices, replacing the banking and finance industry. This is especially evident in innovation-rich cities such as Beijing, Tokyo, Seoul, Shanghai, Singapore, and Osaka. Crow says: “Beijing’s office market will become a hotspot for investors next year as it has a strong talent pool supported by a deep-rooted innovation ecosystem. It has nurtured the most unicorns outside of Silicon Valley and is the third largest destination for venture capital funding.”

Flexible space among global corporate commercial property portfolios is also expected to increase from 19% in 2018 to about 30% by 2020, according to a JLL survey of corporate real estate leaders. Flexible spaces are expected to expand in cities such as Singapore, Tokyo, and Sydney where demand continues to be high and the market there still has room for co-working operators and serviced offices to grow.

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