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2022 will be an exceptional year for real estate investments in Asia-Pacific
Posted on December 13, 2021
Increasing global capital flows and growing optimism to support real estate investments in the region
Gurugram – Colliers (NASDAQ and TSX: CIGI), a leader in diversified professional services and investment management, revealed that quality office assets in major metropolitan markets like London, New York, Tokyo and Sydney have retained their appeal and will be in high demand next year. Core and core-plus office spaces are the world’s top strategic choices, with 60% of investors stating these assets as their investment preference, while industrial and logistics (I&L) assets will be the most coveted.
Their appeal comes not only from the realization that the demand for office space is here to stay, particularly in cities supported by strong transport infrastructure and high amenity values, but also by the ease of deploying capital to large scale of office assets. Rising construction costs, seen by four in five investors (81%) as a problem, could limit new construction, renovations and modernization projects, amplifying demand for existing quality office assets.
âInvestments in the Indian real estate sector have remained resilient despite the headwinds triggered by the pandemic, which has had a negative impact on the economy and the business climate. For the nine months ended in September 2021, investments were recorded to the tune of 3.5 billion dollars, or nearly 75% of the amount observed in 2020. Favorable one-off wholesale agreements have maintained the investment momentum over the course of the year. of the last quarters. It is interesting to note that the residential, industrial and warehousing sectors have become the main beneficiaries this year, collecting together 36% of the investments. While the office will continue to remain a dominant sector, investments in the residential, industrial and warehousing sectors are expected to strengthen in 2022 thanks to strong business fundamentals. Visibility and income stability, attractive valuations and identification of black horses will underline the investment ethic in 2022 â, said Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers.
A milestone year for real estate investments in Asia-Pacific
Across the Asia-Pacific region (APAC), more investors are poised to implement their ambitious plans which have been delayed by COVID-19. Cross-border capital flows are also expected to return, as travel and business activities gradually return.
Piyush Gupta, Managing Director, Capital Markets and Investment Services, Colliers India, added: âThe pandemic has accelerated a number of structural trends and will cause lasting changes in the nature of real estate business in India. This presents several opportunities for investors looking to perpetuate their portfolios or recalibrate their strategy towards growth sectors. This is already evident in the rapid investment allocated to residential, the growing development of data centers, industrial, office as well as the evolution of the life sciences sector. Further opportunities exist in identifying location trends based on changing consumption and working patterns and may also provide investment strategies in new markets in India â.
Overall, I&L assets will be the most sought-after real estate assets in the region, with over 20% of investors anticipating 10-20% capital gains in value-added I&L assets in 2022, supported by favorable winds and large-scale economic transformation.
Significant interest continues to surround core-plus offices, which remain a popular asset class for regional investors in Tier 1 cities such as Singapore, Sydney and Tokyo. 63% of respondents said they plan to invest in these assets, up from 54% last year.
Multi-Family / Built-for-Rent (BTR) properties are also an increasingly sought-after asset class, with investors targeting both basic and development projects. In Japan, this is a well-established sector that has long attracted core foreign capital, while in Australia, it is an emerging asset class with development opportunities.
Retail is for the opportunists as specialized assets gain in favor
Our survey shows that investors see significant potential for retail asset appreciation and reallocation. About a third of investors thinking about retail allocations target opportunistic investments (including change in use). In addition, the hotel industry is also an opportunistic target, with 38% of investors looking at this sector. The hospitality and retail sectors offer good opportunities in cities with large domestic markets, such as Japan, Australia and Korea.
Specialty assets, particularly data centers, life sciences and healthcare, are expected to help drive investment volumes up in 2022, with student housing also poised for a comeback as Australia, the leading market of the region, is open to international visitors.
â2021 has seen a strong investor appetite for emerging asset classes such as data centers and life sciences. Global data management companies, developers and alternative asset managers have formed strategic joint ventures / platforms to develop and operate data centers in India. Additionally, investments in retail and mixed-use assets have appeared on investor radar and made up almost a quarter of total investments in the nine months ended September 2021 as they continue to seek Profitable and stabilized retail assets. Drawing inspiration from the world and the Asia-Pacific, green finance is expected to gain momentum in the years to come as developers, asset owners and investors sign up for sustainability, âsaid added Vimal Nadar, Senior Director and Head of Research, India at Colliers. .
ESG considerations are gaining in importance for investors
The report also shows that ESG (environmental, social, governance) considerations remain important, with nearly three out of four investors surveyed around the world integrating environmental factors into their strategies. This willingness to invest intentionally is both a means of securing their assets and responding to pressures from stakeholders and society forcing them to respond to the climate crisis.
ESG has also become a priority in APAC, as it will soon be a priority in the office sector as government and business tenants pressure landlords to increase their ratings.