Competition for Asia Pacific real estate assets to intensify in 2022: JLL

INVESTOR confidence in Asia Pacific real estate remains strong, with 9 in 10 expecting increased capital deployment this year. This is on the back of a record US$177.3 billion recorded in 2021.

Based on the survey results, 41 per cent of survey respondents said they expect volumes to rise to between US$178 billion and US$192 billion, while 9 per cent said they expect volumes to be even higher.

Deal sizes may also increase; around half of the respondents said they expect larger average deals in 2022.

Sectors they are specifically interested in are those that provide income resilience in stable and mature economies. The top markets that investors plan to invest more on in this year are Sydney for logistics assets, Japan for multifamily properties, and Singapore for office space.

"Competition for assets will emerge as one of the defining themes for the Asia Pacific commercial real estate market in 2022. Despite the increased volatility in global equity markets we see continued competition for real estate assets, and scarcity of product is resulting in many investors focusing platform deals and M&A," said Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL

Respondents identified competition (82 per cent), interest rate uncertainty (56 per cent) and lack of investment product (52 per cent) as the top three capital deployment challenges of 2022.

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To address expected competition for assets, many investors are re-thinking their strategies and risk tolerance levels, noted consultancy.

The strong performance of real estate in recent years, the competitive investment environment, and the underlying need to deploy capital has resulted in a greater focus on core-plus investment strategies, favoured by 52 per cent of respondents and value-add strategies favoured by 53 per cent of respondents.

Meanwhile, direct deals (single assets and/or portfolios) and joint ventures (JVs) will continue to be the 2 most favoured methods to deploy capital in 2022.

But with competition a key hurdle, many investors are looking toward other deal types to increase their asset under management, noted JLL. Platform and/or entity level deals will be the third-most favoured strategy this year.

"A broadening of the capital base for real estate investment and greater cross border activity may also spur greater platform and entity-level transactions. Acquiring an existing platform or entity allows investors with relatively limited experience to leverage manager expertise, be it at sector, city, or regional level," said JLL.

The Investor Sentiment Barometer was based on survey with investment leaders from 37 global and regional investors. Most survey respondents identified themselves as real estate and/or private equity managers (74 per cent), representing some of the world's largest real estate investors and asset managers.