Four real estate sectors on investors’ radar
The growing investment appetite for multifamily assets is most apparent in Japan, which is on the verge of becoming one of the top five living markets globally.
At the end of last year, Allianz Real Estate and Canadian pension fund manager Ivanhoe Cambridge jointly announced a US$2 billion strategy for investing in Japanese rental apartments. Boston-based fund manager AEW Capital Management also recently acquired a portfolio of four newly completed residential buildings with a combined 177 units in Greater Tokyo.
Opportunities may be more limited outside of Japan, but multifamily assets remain an attractive proposition for regional investors seeking diversification because they are relatively low-risk and offer stable returns, says Peter Guevarra, Director, Regional Research, Asia Pacific, JLL.
“With this continued capital shift into the sector, nascent multifamily (or build-to-rent) markets in countries such as Australia will increasingly be an investment destination for a growing pool of capital,” Guevarra says.
Office
Six in 10 investors surveyed have plans to increase their office sector investments in 2022, with this group helping plotting to grow their portfolios by more than 10%.
The pandemic, which led to the rise of remote and hybrid working, slowed office investment, with volumes in APAC dipping from US$87.4 billion in 2019 to US$63.8 billion in 2020, according to JLL. However, the office sector remains resilient as volumes hit US$74.4 billion last year.
In supply-constrained office markets such as Singapore — one of the top three markets identified by investors for capital deployment — office rents rose 4.2% year-on-year, according to JLL’s Asia Pacific Office Digest.
alternatives
More than half of investors in the JLL survey said they are targeting an increase in exposure to alternative asset classes.
A popular example is data centres, where investors have been ramping up investments to address the burgeoning demand for data consumption.
Data center investments in APAC rose to US$5.4 billion last year, trebling the levels in 2019 before the pandemic, according to JLL. Major deals have been announced so far in 2022, including a 1.5 trillion yen (US$13 billion) investment by real estate developer and asset manager GLP to build data centers in Japan’s biggest cities over the next few years.
Other alternative sectors emerging include cold storage and life sciences facilities.
“Diversification into other asset classes, strong competition in the traditional real estate sectors, and positive structural tailwinds are supporting the investment thesis into these alternative sectors,” says Guevarra.