Real estate investment in Asia-Pac to outperform other regions in 2020: JLL

Singapore has stepped up its sustainability efforts with the decentralisation of its central business district, which encourages redeveloping older office buildings into mixed-use integrated developments and reducing the use of private transport.
DECEMBER 17, 2019 - 1:52 PM

INVESTMENT in Asia Pacific real estate has reached US$125 billion in the first three quarters of 2019, up 10 per cent year-on-year, and is set for another strong year in 2020, said JLL.

Stuart Crow, chief executive officer of Capital Markets Asia Pacific, JLL, said: “Over the next two years, we expect global real estate transaction volumes to stay elevated and Asia Pacific to outperform Europe and the Americas with an outsized portion of global investor interest."

According to JLL, foreign investments into Asia Pacific are at a decade-high, making up 35 per cent of total volumes in 2019, mostly driven by private equity funds and large-scale transactions.

“Real estate in Asia Pacific has gained favour in the last year as investors continue to seek high yields and stability amid a climate of geopolitical uncertainty and slowing economic growth,” said Mr Crow.

Looking into 2020, the real estate consultancy expects a stronger investor appetite for logistics, which means logistics facilities will be held tightly, prompting investors to become more creative to access quality assets.

Mr Crow noted there is a rising trend of investors launching joint ventures with major players or mergers and acquisitions to access quality portfolios, such as the investment of the Canadian pension fund OMER into ESR logistics platform, and ESR’s acquisition of Propertylink real estate investment trust (Reit).

With Asia Pacific Reits having raised a record amount of capital at over US$14 billion in 2019, JLL further predicts that Singapore and India will see more Reits initial public offerings next year, mainly driven by their focused growth strategies and consistent trading performance. 

“Looking ahead, Reits are likely to continue their strong trading performance and be highly competitive buyers of real estate assets. Size matters and we can expect to see more consolidation in this sector,” said Mr Crow.

More strategic mergers and acquisitions allow funds to expand geographically and deepen their investments into newer markets in the US and Europe, according to JLL.

Expecting more sustainable technologies to reduce operating costs and innovative design to attract more occupants and tenants in 2020, JLL also highlights investment opportunities in the green building sector.

Mainboard-listed Keppel Reit announced on Dec 4 that it has obtained a green loan facility from OCBC to grow its green building portfolio.

“We believe that governments in this region are sustainability conscious and proactive in transforming their cities to make them smarter and more livable,” said Mr Crow. “These initiatives present opportunities for astute real estate investors, either by acquiring or developing sustainable assets, or being a part of the city redevelopment process.”

Beijing has restricted the size of commercial developments in its central area and targets to reduce the population in its six central districts by 15 per cent from the 2014 size, according to JLL.

Similarly, Singapore has stepped up its sustainability efforts with the decentralisation of its central business district, which encourages redeveloping older office buildings into mixed-use integrated developments and reducing the use of private transport. 

The Business Times previously reported that Colliers International has extended the deadline for The Arcade’s en bloc sale, with the real estate agency citing strong interest from developers and requests from them for more time to evaluate the centrally-located site at Raffles Place.

As for the office sector, technology firms – particularly online platforms – are playing a greater role in driving up rents for premium offices, than the traditional banking and financial services industry.

This is especially so in innovation-rich cities like Beijing, Singapore, and Tokyo, which harbour an advanced innovation ecosystem supported by highly skilled workforce.

“Beijing’s office market will become a hotspot for investors next year as it has a strong talent pool supported by a deep-rooted innovation ecosystem. It has nurtured the most unicorns outside of Silicon Valley and is the third largest destination for venture capital funding,” added Mr Crow.

Flex spaces, which grant companies the freedom to decide how much space to lease for how long, are likely to expand in key gateway cities such as Singapore, Tokyo and Sydney, where demand continues to be high and there is room for more coworking operators and serviced offices to grow, said JLL.

Mr Crow said: “Landlords and developers are likely to maintain their partnerships with coworking operators or serviced offices, and some will create their own flex space offerings to keep up with tenants’ changing needs.”

Globally, flex space has been projected to further grow. A separate JLL survey of 560 corporate real estate firms found in 2018 that collaborative and agile workspaces are expected to increase from 19 per cent in 2018 to around 30 per cent of the global corporate commercial property portfolio by 2020.