According to JLL, a global commercial real estate consultancy, Asia Pacific's overall real estate transaction volumes are predicted to increase by 5% in 2019, albeit the rate of expansion will moderate.
Mr. Stuart Crow, Head of Capital Markets, JLL Asia Pacific, says, "A decade into the economic cycle, investors are contending with macro risks 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." used cars for sale
"With its portfolio diversification benefits and relatively better returns compared to other asset classes, real estate continues to look appealing as a safe haven for investments. However, because income-producing options are becoming harder to come by in this late-cycle scenario, investors are becoming more selective and rigorous in abandoning investments."
The strong demographic fundamentals in Asia Pacific will continue to boost real estate demand. By 2027, the region's urban population will have surpassed 400 million people, while the population of persons aged 65 and up will have increased by 146 million people. The e-commerce sector in Asia Pacific is expected to reach US$1.6 trillion by 2021.
"Despite the macro concerns, we believe that this region's opportunities will mitigate the risks," says Dr. Megan Walters, Head of Asia Pacific Research at JLL. "We believe that this region's opportunities will spur investors and occupiers to look into sectors that have defensive qualities or those that run on less cyclical demand drivers."
According to JLL, the market in Asia Pacific will be shaped by five important themes in 2019.
Assets that are 'alive' are increasing in value.
With the region's growing urban population, demand for alternative living arrangements such as student housing, co-living, multi-family, nursing homes, and aged care has increased.
These living sectors provide investors with high dividends, long-term growth potential, and portfolio diversification opportunities. "Because of their effective use of space, improved building management, and generally higher entry returns, these new sectors are set to outperform traditional residential assets," Mr. Crow argues. "In Tokyo, for example, returns on aged care range from 11 to 14 percent, while in Singapore, returns range from 8 to 12 percent."
Creating adaptable workspaces to attract talent
Businesses are increasingly turning to collaborative workspaces to encourage employee innovation and win the struggle for talent. This renewed focus on creating human experiences has resulted in an increase in flexible workplaces across the region, including co-working and serviced offices.
According to Dr. Walters, "Flexible work spaces could account for 30% of some corporate commercial property portfolios by 2030. This indicates that market consolidation will become more widespread, with landlords and developers creating their own flexible space offers, forming joint ventures with coworking providers, and considering mergers and acquisitions among coworking brands."
Logistics and data centers are on the rise.
With Asia Pacific leading the world in e-commerce adoption, firms are under increasing pressure to create data storage infrastructure as well as physical retail warehousing facilities.
According to Mr. Crow, "In Asia Pacific, the solid rate of consumption is generating increased investor interest in data centers and logistics. These industries will continue to grow, with a lot of money going into rising markets like China, India, and Indonesia. Meanwhile, the number of logistics hubs in large cities is increasing. The logistics market in Sydney, for example, grew seven-fold between 2015 and 2017."
Shift in the direction of debt exposure
According to Mr. Crow, when banks tighten their lending standards, this creates an opportunity for non-bank and offshore lenders to enter the market, notably in Australia, India, and China. As a result, a growing number of investors are turning to global offshore lenders for flexible debt or equity financing on specific projects.
Similarly, institutional investors are diversifying their real estate debt portfolios. "Debt investment is one approach to reduce risk in a portfolio," Mr. Crow continues, "and investors are increasingly seeking for ways to use debt to protect themselves against market volatility and diminishing property incomes."
The development of smart cities
With smart city efforts gaining traction in Singapore, Japan, South Korea, and Australia, the Asia Pacific region is seeing a growing need to strengthen digital infrastructures in order to increase efficiency, sustainability, and improve residents' living conditions.
Dr. Walters elucidates: "Proptech, or the fusion of real estate with technology, is critical to city growth in the future. Smart property development and management enable substantial data collecting and analytics, which are both critical for cities to produce more livable settings for their rising populations, as smart cities are highly data-driven."