Investors eye commercial property and logistics assets in Japan, Korea and Australia
The omicron outbreak may have brought uncertainty to real estate assets but commercial property is defying the trend where higher growth is expected for commercial property investments in the Asia Pacific.
Among the niche assets attracting the attention of investors are self-storage assets in Hong Kong, offices in major CBDs in Japan and in Brisbane, Australia, as well as logistics assets in South Korea.
According to CBRE’s 2022 Asia Pacific Investor Intentions Survey published on January 20 investment sentiment towards Asia Pacific commercial real estate remains positive, with around 60% of investors intending to purchase more assets this year.
Stronger interest in core-plus and value-added opportunities is also being captured alongside a growing appetite in the office sector, with a sharper focus on data centres, cold-storage and healthcare among other alternatives. Tokyo remains the most attractive city for cross-border investment, closely followed by Shanghai, according to the survey.
“In terms of sectors across Asia, there are key investments in what we call the specialty sector which covers more non-traditional property sector types including self-storage, where we are an active investor in that space in four markets across APAC,” Brad Fu, co-Director of Heitman’s Asia Pacific Private Equity Group, told AsianInvestor.
“We are aware that on the hospitality side and certain retail exposures will have challenges across the market. Nevertheless, we have a heavy weighting towards specialty assets including self-storage which has actually seen very positive trends,” he added.
RECORD HIGH
Investors, meanwhile, are seeing a record year for Asia Pacific commercial real estate in 2022, driven by steady economic growth and pent-up investor demand, according to another CBRE’s 2022 Asia Pacific Real Estate Market Outlook published on January 13.
Total investment is expected to grow by at least 5% to more than $150 billion, surpassing the record high of $142 billion in 2017. Logistics assets are being keenly sought after and while interest in offices is projected to revive.
Strong investment activity from close-ended real estate funds, REITs and institutional investors—including many that pressed pause on acquisitions at the onset of the pandemic in 2020—are expected to drive the recovery.
OFFICE POTENTIAL
Most cities, including Hong Kong, are now facing the reality of longer work-from-home scenarios as the new variant hits. However, investors are still looking at CBDs throughout the region as top picks over the longer term, with Hong Kong, Brisbane and Tokyo favoured picks.
“For the Hong Kong market, I think we're seeing early signs of recovery. We think the function of the CBD will continue to persist and I think the vibrancy and diversity of the human capital that is being attracted to the CBD in these key cities across Asia will continue on a post-Covid basis,” Fu said.
With domestic conditions not supportive of work-from-home over the longer term, Fu added that CBD offices assets will continue to hold value but the recovery will need to transpire over time.
"Another more niche area that perhaps may be overlooked, but we think has strong potential, are CBD office investments in the Brisbane market in Australia," he said.
He said he believed the market offers higher relative yields compared with other Australian cities and, on a demographic basis, Queensland is seeing net migration growth because of the relative affordability of residential property.
CBRE expects 2022’s office leasing activity, as measured by net absorption, to increase by up to 10% year-on-year on the back of a rebound in demand.
E-COMMERCE-DRIVEN LOGISTICS
Asia Pacific’s industrial and logistics sector is also likely to see another strong year, buoyed by a solid regional economic outlook and improved global trade.
Logistics rents are expected to grow for the 12th consecutive year across all major markets, led by Hong Kong, which is expected to benefit from trade growth when borders with mainland China re-open, as well as reduced supply availability, according to the CBRE report.
"We're very confident in sectors such as logistics in Seoul, where e-commerce penetration rate is highest globally. And the supporting infrastructure for that e-commerce trade is generating very strong demand momentum of high quality warehouse properties," Fu added.
“Logistics assets remain keenly sought after by investors in 2022, while interest in premium offices that target new economy tenants is expected to strengthen, supported by the return to the office,” according to Greg Hyland, head of Capital Markets for Asia Pacific at CBRE.
Heitman is a global real estate investment management firm with over $47 billion in assets under management.
The CBRE survey polled more than 530 Asia Pacific-based investors in November and December 2021 across a range of investor types from developers, private investors and REITs to institutions such as sovereign wealth funds, insurance companies and pension funds.
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