The New Year has barely begun but already the real estate market in Asia Pacific is showing promising signs of momentum.
In an encouraging show of confidence, insurance conglomerate Allianz recently announced that its property arm, Allianz Real Estate, plans to double its investment in the region over the next three years.
Sustained interest in APAC’s core markets as well as developing destinations has led to forecasts that the region’s transaction volumes will grow five percent over 2018 to hit US$140 million.
Sectors and markets to watch
Amongst the developing markets, investors are paying close attention to India, according to Dr Megan Walters, Head of Research for JLL Asia Pacific, who predicts that India’s Tier 1 office and retail sectors will show the highest total returns in 2018.
After short-term disruption brought on by reforms such as demonetisation and the implementation of Goods & Services Tax, 2018 could be the year for investors to consider a strategic entry into India, given its positive long-term fundamentals and economic growth, she says.
The alternatives sector, which includes the likes of data centres, self-storage facilities, student housing and aged care, is expected be another stand out throughout the year, says Dr Walters, with favourable demographics presenting an opportunity to investors.
Self-storage facilities are a good example, where yields compare well to other traditional asset classes, ranging from five to seven percent in Tokyo and Singapore, five to eight percent in Australia, and around eight percent in China and India.
However, it’s not all positive fundamentals. Dr Walters cautions that China’s tightening of financial markets could lead to a slow-down in real estate and infrastructure construction.
She adds that, globally, central banks are moving toward higher interest rates for the first time since the financial crisis and “the prospect of the Federal Reserve again raising its interest rates could set Asian governments on a similar course.”
In November, South Korea increased interest rates for the first time in six years to 1.5 percent.
Technology and co-working
Investment aside, technology is set to play an increasingly bigger role in real estate as digitisation of services, the Internet of Things (IOT), and automation will have a significant impact on strategy, team structures and processes.
While, co-working – once seen purely as a fad – has become entrenched as a proven strategy to attract the best talent and boost productivity through thoughtful office design.
According to Jeremy Sheldon, Managing Director, Markets and Integrated Portfolio Services at JLL Asia Pacific, this shift is beginning to transform office space. “The workspace of the future is one that can meet employee needs, while driving effectiveness and engagement levels,” he says.
Click to read more about the real estate landscape in Asia Pacific.