Asia Pacific real estate investment to rebound in 2021: JLL
Singapore, February 19 (ANI): Investment management services firm JLL has forecast that Asia-Pacific real estate investments will continue to recover in 2021 and direct transactions will increase by 15 to 20 percent year-on-year.
Alternative asset classes such as logistics, apartment buildings and data centers should also drive investment activity this year. In addition, office, retail and hotel investment businesses are expected to grow in line with economic growth.
Office real estate remains the core of most investors, but JLL expects that with the demand for flexible space, more value creation strategies will emerge and healthier buildings with more collaborative space will increase.
The majority of Asian occupiers have returned to the office, but JLL estimates that remote working will increase by one day per week.
Real estate investment volumes declined 20 percent in 2020, but were driven by a recovery in the final quarter, with transaction levels unchanged from a year earlier.
North Asian markets were the most resilient in the fourth quarter, according to JLL Capital Tracker. China (plus 21 percent), Japan (plus 37 percent) and South Korea (plus 16 percent) saw higher transaction volumes compared to the previous quarter due to the stronger economic recovery and the deep pools of domestic capital.
Elsewhere in the region, a recovery in Indian investment transactions was supported by robust activity in the REIT sector.
According to JLL, logistics and multi-family investments increased by 29 percent and 26 percent respectively in 2020 compared to the previous year. These asset classes made up almost 30 percent of the total, which shows how attractive they are to investors.
In comparison, hotels, retail and office transactions were hardest hit, declining over 25 percent year over year.
“Investors have no doubt faced a challenging operating environment in 2020, but our interactions have confirmed that they have realigned their strategies and reaffirmed their commitment to the region,” said Stuart Crow, CEO, Asia Pacific Capital Markets, JLL.
“With transactions nearing pre-pandemic levels in the fourth quarter, we expect investor confidence to increase in 2021 as capital adjusts and longer-term opportunities in the region clearer,” said he.
In the years to come, the prospect of a longer period of low yields and low interest rates is likely to further compress returns for various asset classes.
In most cities, logistics facilities are projected to have higher returns than office facilities, but which have lower income volatility. Also, lower borrowing costs offer wide spreads to offset lower rental growth.
“While most investors are still under-allocated to these sectors, we expect these classes to become a central part of their portfolios over the next few years,” said JLL.
“Another issue in 2021 could be a shift in asset allocation to more opportunistic and value-adding strategies,” it said. (ANI)