Why logistics is a bright spot for APAC investment
Asia Pacific real estate investment dipped 20 percent last year, although a strong fourth quarter moderated declines
While commercial real estate investment in Asia Pacific has remained subdued during the pandemic, the logistics sector has proved a bright spot.
Logistics investment volumes in APAC were $US32 billion in 2020, a 29 percent rise from the year earlier, according to JLL data. This was nearly 30 percent of total real estate investment volumes in the region.
By comparison, hotels, retail, and office – some of the more traditional real estate sectors – saw year-on-year investment fall over 25 percent. Overall real estate investment volumes fell 20 percent last year, according to the JLL Capital Tracker.
“Investors undoubtedly faced a challenging operating environment in 2020,” says Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL. “However, our interactions have confirmed that they refocused strategies on hot sectors like logistics and multifamily.”
Multifamily sector investment volumes rose 26 percent year-on-year in 2020, JLL data show.
Sectors like logistics and multifamily have climbed investors’ wish lists due to efforts to diversify portfolios, especially in markets witnessing stronger economic recoveries. Logistics in particular has benefited from a structural shift to online shopping.
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“Generally, investors remain under-allocated to logistics and multifamily assets,” Crow says. “But due to the continued expansion of e-commerce globally, and the increased adoption of technology, they are looking closely at available opportunities to close this gap.”
A continued hunt for yield amid low interest rates, and large amounts of unspent capital, means demand is expected to remain robust.
“In a low growth, low rates world, the attractiveness of sectors with higher yields and historically lower rental growth can become more pronounced, and we expect logistics, data centres, and multifamily to be the beneficiaries of increased capital allocation,” says Regina Lim, Head of Capital Markets Research, Asia Pacific, JLL. “While most investors are still under-allocated to these sectors, we expect these classes to become a core part of their portfolios over the next few years.”
North Asian countries China, Japan and Korea were standout markets in the fourth quarter, with all three again recording a rise in transaction volumes from the previous quarter. Robust outlooks for economic growth helped boost activity, especially in China, which posted positive GDP growth for 2020.
JLL expects APAC real estate investment to rebound in 2021, with direct transactions to rise 15 percent to 20 percent.
“Given that transactions volumes in the fourth quarter were flat year-on-year, we expect investor confidence to grow in 2021 as capital adapts and the longer-term opportunities in the region become clearer,” says Crow.
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