Four real estate sectors on investors’ radar
A survey shows investors are set to further diversify their portfolios in Asia Pacific
Investors are zooming in on a few key sectors as they recalibrate strategies to offset the intensifying competition — a problem many of them are anticipating this year.
Around four out of five investors identified competition for assets as the biggest hurdle to their investment strategies in 2022, according to JLL’s Investor sentiment barometer, a survey of top leaders from 37 global and Asia Pacific (APAC) investors with over US$2 trillion of assets under management (AUM).
Still, most of those surveyed said they plan to increase their real estate investment this year with a focus on sector diversification.
“It’s good to see confidence returning strongly,” says Roddy Allan, Chief Research Officer, Asia Pacific, JLL. “While investors are still looking for income resilience in stable, mature economies, they are creating strategies that emphasise diversification across sectors, geographies, and deal types.”
Read on for the four main sectors in APAC where investors have said they will be hunting for deals this year.
Investment momentum in the logistics sector, which saw a fourfold rise in total capital deployed in the region over the past two years, looks set to continue in 2022.
Looking for more insights? Never miss an update.
The latest news, insights and opportunities from global commercial real estate markets straight to your inbox.
Nine in 10 investors in the JLL survey said they will increase investments in the sector this year. Two-thirds expect to grow their total investments by more than 10%.
Some markets saw a higher level of investment activity and larger deals last year. Australia, for instance, was a standout market, with investment volumes rising 269% year-on-year.
In December, global asset management firm Blackstone acquired a 49% stake in the Dexus Australia Logistics Trust — which owns a portfolio of 77 high-quality logistics assets in Sydney and Melbourne — from Singapore’s sovereign wealth fund GIC.
Interest in Australia’s logistics sector has shown no signs of waning in the first months of 2022. Investors surveyed by JLL singled out Sydney as the top market in APAC where they are intending to deploy capital.
The second-most sought-after sector was multifamily, with one in three investors wanting to increase their multifamily AUM by at least 10% this year, according to the JLL survey.
The growing investment appetite for multifamily assets is most apparent in Japan, which is on the verge of becoming one of the top five living markets globally.
At the end of last year, Allianz Real Estate and Canadian pension fund manager Ivanhoe Cambridge jointly announced a US$2 billion strategy for investing in Japanese rental apartments. Boston-based fund manager AEW Capital Management also recently acquired a portfolio of four newly completed residential buildings with a combined 177 units in Greater Tokyo.
Opportunities may be more limited outside of Japan, but multifamily assets remain an attractive proposition for regional investors seeking diversification because they are relatively low-risk and offer stable returns, says Peter Guevarra, Director, Regional Research, Asia Pacific, JLL.
“With this continued capital shift into the sector, nascent multifamily (or build-to-rent) markets in countries such as Australia will increasingly be an investment destination for a growing pool of capital,” Guevarra says.
Six in 10 investors surveyed have plans to increase their office sector investments in 2022, with half of this group plotting to grow their portfolios by more than 10%.
The pandemic, which led to the rise of remote and hybrid working, slowed office investment, with volumes in APAC dipping from US$87.4 billion in 2019 to US$63.8 billion in 2020, according to JLL. However, the office sector remains resilient as volumes hit US$74.4 billion last year.
In supply-constrained office markets such as Singapore — one of the top three markets identified by investors for capital deployment — office rents rose 4.2% year-on-year, according to JLL’s Asia Pacific Office Digest.
More than half of investors in the JLL survey said they are targeting an increase in exposure to alternative asset classes.
One popular example is data centres, where investors have been ramping up investments to address the burgeoning demand for data consumption.
Data centre investments in APAC rose to US$5.4 billion last year, trebling the levels in 2019 before the pandemic, according to JLL. Major deals have been announced so far in 2022, including a 1.5 trillion yen (US$13 billion) investment by real estate developer and asset manager GLP to build data centres in Japan’s biggest cities over the next few years.
Other alternative sectors emerging include cold storage and life sciences facilities.
“Diversification into other asset classes, strong competition in the traditional real estate sectors, and positive structural tailwinds are supporting the investment thesis into these alternative sectors,” says Guevarra.
Contact Roddy AllanChief Research Officer, Asia Pacific, JLL
What’s your investment ambition?
Uncover opportunities and capital sources all over the world and discover how we can help you achieve your investment goals.