4 bright spots for investors in 2023
Slowing global growth is forcing investors to be more selective on sector deals
Investors are increasingly cautious as global growth slows, with the focus shifting to real estate sectors most likely to weather any bumps in the economy.
Real estate investment volumes in Asia are forecast to shrink up to 10% in 2023, according to JLL’s Asia Pacific Outlook 2023.
However, any disruptions to the economy are expected to be short-lived, says Roddy Allan, Chief Research Officer, Asia Pacific, JLL.
“Market participants should be thinking beyond this period to take advantage of opportunities that lie ahead,” he says.
Here are the top sectors where investors think will do better than others this year.
One of the popular sectors winning investors’ favour is Japan’s multifamily sector, buoyed by a weakening yen and ultra-low interest rates.
Recent deals highlight continued confidence in the Japanese market.
U.S. developer Hines acquired 11 multifamily properties last month as part of its plans to reach US$1 billion in assets in Japan within three to five years. Two months prior, Singaporean real estate investment firm TE Capital Partners sealed a US$100 million acquisition of 16 rental residential properties in Tokyo.
“With yield spreads still attractive and with investors expected to dispose of large portfolios in Japan, more investment opportunities could yet emerge in the year ahead,” says Sungmin Park, Director, Asia Pacific Capital Markets Research, JLL.
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Interest in China’s multifamily sector is also growing, particularly in rental housing projects that are popular among the young generation.
“Local state-owned enterprises are accelerating the construction of multifamily projects, while foreign investors are seeking opportunities to team up with local players to acquire projects to convert into multifamily,” says Sherril Sheng, Director, Research Consultancy, JLL.
Last September, Brookfield acquired a serviced apartment project in Shanghai’s Yangpu District for RMB 1.26 billion (US$180 million) from debt-laden Chinese developers Guangzhou R&F Group and KWG Group Holdings.
The launch of rental housing Real Estate Investment Trusts (REITs) this year is also increasing exit channels for rental housing investment and driving activity, says Sheng.
Shanghai, for instance, saw 15 en-bloc transactions involving rental housing projects worth RMB 6.5 billion (US$938 million), a 265% increase year-on-year, JLL data shows.
Despite rising headwinds, market demand is anticipated to remain firm across Greater China following the relaxation of zero-Covid restrictions in December, says Peter Guevarra, Director, Regional Research, Asia Pacific, JLL.
“The loosening of restrictions will allow logistics facilities affected by the lockdowns to operate at higher capacity and with greater certainty of future production levels,” says Guevarra. “This reopening will not only ease domestic, regional and global supply chain backlogs, but also help attract greater capital inflow into the country.”
There have been signs of recovery and sustained demand so far. In Shanghai, traditional drivers including 3PL, e-commerce, and retailer companies continue to be active while emerging drivers like new-energy vehicle makers are fuelling increased demand for logistics space, according to Guevarra.
Tight supply and demand dynamics for Australia’s logistics sector continue to underpin a solid outlook, similar to the wider region where rents rose 6.5% year-on-year in the third quarter last year, according to JLL data.
“Despite rising vacancy pressures, demand remains strong, and vacancy remains below the long-term average across mature markets,” says Guevarra.
These market conditions make Australian cities favourites to emerge as the top rental growth performers in 2023, he says.
“The fundamental undersupply of prime space in core locations, such as in Sydney and Melbourne, and rental reviews by landlords who are factoring in inflationary pressures, are expected to put upward pressure on logistics rents across the country.”
Contact Roddy AllanChief Research Officer, Asia Pacific, JLL
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