JLL: In­vestors to raise trans­ac­tions

Bangkok Post - - BUSINESS -

Asia-Pa­cific’s real es­tate trans­ac­tion vol­umes in 2019 are ex­pected to rise by 5%, says global real es­tate con­sul­tant JLL. “A decade into the eco­nomic cy­cle, in­vestors are con­tend­ing with macrorisks and geopo­lit­i­cal uncer­tainty such as ris­ing in­ter­est rates, con­tin­ued trade ten­sions be­tween the US and China, as well as strains in the EU caused by Brexit ne­go­ti­a­tions,” said Stuart Crow, head for cap­i­tal mar­kets of JLL Asia-Pa­cific. “Against this back­drop, real es­tate con­tin­ues to be a safe haven for in­vest­ments, with port­fo­lio di­ver­si­fi­ca­tion ben­e­fits and rel­a­tively higher re­turns com­pared with other as­set classes. In this late-cy­cle en­vi­ron­ment, in­vestors are be­com­ing more se­lec­tive and dis­ci­plined when ex­it­ing in­vest­ments be­cause it’s get­ting harder to find in­come-pro­duc­ing al­ter­na­tives.” Me­gan Wal­ters, head of Asia-Pa­cific re­search for JLL, said, “De­spite the macro-con­cerns, we be­lieve this re­gion’s op­por­tu­ni­ties will mit­i­gate the risks, spurring in­vestors and oc­cu­piers to look into sec­tors that have de­fen­sive qual­i­ties or those that run on less cycli­cal de­mand driv­ers.” In Asia-Pa­cific, JLL says real es­tate de­mand will con­tinue to be driven by strong de­mo­graphic fun­da­men­tals. The re­gion’s ur­ban pop­u­la­tion is ex­pected to ex­ceed 400 mil­lion peo­ple by 2027, while peo­ple aged 65 and above will rise by 146 mil­lion peo­ple within the next 10 years. By 2021, Asi­aPa­cific’s e-com­merce mar­ket is pro­jected to grow to US$1.6 tril­lion (51.1 tril­lion baht). The five key trends ex­pected to shape the in­dus­try in Asia-Pa­cific in 2019:


The re­gion’s grow­ing ur­ban pop­u­la­tion has a grow­ing de­mand for al­ter­na­tive res­i­den­tial ar­range­ments, in­clud­ing stu­dent ac­com­mo­da­tion, co-liv­ing, multi-fam­ily, nurs­ing homes and aged care. For in­vestors, these liv­ing sec­tors of­fer at­trac­tive yields and long-term growth prospects as well as an op­por­tu­nity for port­fo­lio di­ver­si­fi­ca­tion. “These new sec­tors are set to out­per­form tra­di­tional res­i­den­tial as­sets, given their ef­fi­cient use of space, su­pe­rior build­ing man­age­ment, and gen­er­ally higher en­try yields,” said Mr Crow. “Aged care, for in­stance, of­fers re­turns of 11-14% in Tokyo, and 8-12% in Sin­ga­pore.”


Busi­nesses in­creas­ingly use shared workspaces as a way to foster in­no­va­tion among em­ploy­ees and win the war for tal­ent. This re­newed fo­cus on build­ing hu­man ex­pe­ri­ences has led to an uptick in flex­i­ble of­fices — in­clud­ing cowork­ing and serviced of­fices — across the re­gion. “By 2030, flex­i­ble workspaces could com­prise 30% of some cor­po­rate com­mer­cial prop­erty port­fo­lios world­wide. This means that mar­ket con­sol­i­da­tion will be­come more com­mon — land­lords and de­vel­op­ers will start to cre­ate their own flex­i­ble space of­fer­ings, form joint ven­tures with co-work­ing providers, or look at merg­ers and ac­qui­si­tions among co-work­ing brands,” said Ms Wal­ters.


With Asia-Pa­cific lead­ing global e-com­merce adop­tion, there is ris­ing pres­sure for or­gan­i­sa­tions to es­tab­lish data stor­age in­fra­struc­ture as well as ware­hous­ing fa­cil­i­ties for phys­i­cal re­tail goods. “The ro­bust rate of con­sump­tion is driv­ing in­creas­ing in­vestor in­ter­est into data cen­tres and lo­gis­tics in Asi­aPa­cific. These sec­tors will con­tinue to ex­pand, with sig­nif­i­cant cap­i­tal tar­get­ing emerg­ing mar­kets like China, In­dia and In­done­sia. Lo­gis­tics hubs in ma­jor cities are grow­ing. For ex­am­ple, the lo­gis­tics mar­ket in Syd­ney in­creased sev­en­fold dur­ing 2015-17,” said Mr Crow.


With banks tight­en­ing their lend­ing cri­te­ria, a gap is left for non-bank and off­shore lenders to en­ter the mar­ket, par­tic­u­larly in Aus­tralia, In­dia and China, said Mr Crow. As a re­sult, there is a spike in in­vestors turn­ing to global off­shore lenders who pro­vide flex­i­ble forms of ei­ther debt or eq­uity on se­lected projects. In­sti­tu­tional in­vestors are also ex­pand­ing their foot­print into real es­tate debt. “Debt in­vest­ment is one way to curb risk in a port­fo­lio and in­vestors are in­creas­ingly look­ing at ways to use debt to shield them from mar­ket volatil­ity and fall­ing prop­erty in­comes,” he said.


With smart city ini­tia­tives push­ing ahead in Sin­ga­pore, Ja­pan, South Ko­rea and Aus­tralia, Asia-Pa­cific has seen an in­creas­ing need to build bet­ter dig­i­tal in­fras­truc­tures to max­imise ef­fi­ciency, sus­tain­abil­ity and im­prove the liv­ing con­di­tions for in­hab­i­tants. “Proptech — the con­ver­gence of real es­tate and tech­nol­ogy — plays a key role in the fu­ture de­vel­op­ment of cities. As smart cities are highly data-driven, smart prop­erty de­vel­op­ment and man­age­ment en­able ex­ten­sive data col­lec­tion and an­a­lyt­ics — both of which are cru­cial for cities to cre­ate more live­able en­vi­ron­ments,” said Ms Wal­ters.

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