Investors Interest in Commercial Real Estate and Logistics Assets in Japan, Korea and Australia | Fund managers

The omicron outbreak may have brought uncertainty to real estate assets, but commercial real estate is defying the trend that higher growth is expected for commercial real estate investments in Asia-Pacific.

Among the niche assets that are attracting investors’ attention are self-storage assets in Hong Kong, offices in major CBDs in Japan and Brisbane in Australia, and logistics assets in South Korea.

According to CBRE’s 2022 Asia-Pacific Investor Intentions Survey released on January 20, investment sentiment towards commercial real estate in Asia-Pacific remains positive, with approximately 60% of investors intending to buy more assets this year.

Increased interest in core-plus and value-added opportunities is also captured alongside a growing appetite in the office sector, with a stronger focus on data centers, cold storage and healthcare, among others. alternatives. Tokyo remains the most attractive city for cross-border investment, followed closely by Shanghai, according to the survey.

“In terms of sectors across Asia, there are key investments in what we call the specialist sector which covers more non-traditional types of real estate sectors, including self-storage, where we are an active investor in this space in four APAC markets,” Brad Fu, co-head of Heitman’s Asia-Pacific private equity group, said. Asian investor.

Brad Fu, Heitman

“We are aware that on the hospitality side and some retail exposures, there will be challenges across the entire market. Nevertheless, we have a large weighting towards specialist assets, including self-storage, which has actually seen very positive trends,” he added.

RECORD HIGH

Investors, meanwhile, are enjoying a banner year for commercial real estate in Asia Pacific in 2022, driven by steady economic growth and pent-up investor demand, according to another CBRE 2022 Asia Pacific Real Estate Market Outlook report released on Tuesday. January 13.

Total investment is expected to increase by at least 5% to more than $150 billion, surpassing the record high of $142 billion in 2017. Logistics assets are highly sought after and interest in office space is expected to revive.

Strong investment activity by closed-end real estate funds, REITs and institutional investors – many of whom halted acquisitions at the start of the pandemic in 2020 – should 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 arrives. However, investors still view CBDs across the region as the best long-term picks, with Hong Kong, Brisbane and Tokyo being the favorites.

“For the Hong Kong market, I think we are seeing the first signs of recovery. We believe the function of CBD will continue to persist and I believe the vibrancy and diversity of human capital that is attracted to CBD in these key cities in Asia will continue on a post-Covid basis,” Fu said.

With national conditions not conducive to long-term working from home, Fu added that CBD office assets will continue to retain value, but the recovery will need to be felt over time.

“Another niche area that may be overlooked, but which we believe has great potential, is CBD office investment in the Brisbane market in Australia,” he said.

He said he believed the market offered higher relative returns than other Australian cities and that, on a demographic basis, Queensland was seeing net growth in migration due to the relative affordability of real estate. residential.

CBRE expects office leasing activity in 2022, as measured by net uptake, to grow by up to 10% year-over-year on the back of a rebound in demand.

E-COMMERCE-DRIVEN LOGISTICS

Greg Hyland, CBRE

Asia-Pacific’s industrial and logistics sector is also expected to have another strong year, supported by strong regional economic prospects and improving global trade.

Logistics rents are expected to rise for the 12th consecutive year in all major markets, led by Hong Kong, which is expected to benefit from growing trade as borders reopen with mainland China, as well as reduced availability of offer, according to the CBRE report. .

“We are very confident in sectors such as logistics in Seoul, which has the highest e-commerce penetration rate in the world. And the supporting infrastructure for this e-commerce is generating a very strong demand for high-quality warehouse properties,” Fu added.

“Logistics assets remain highly sought after by investors in 2022, while interest in high-end 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 surveyed 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, investment companies insurance and pension funds.

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