Investors are showing a growing interest in deploying capital into Asia Pacific real estate markets with high levels of liquidity, according to Hamish MacDonald, Head and Chief Investment Officer of APAC Real Estate at BlackRock. In particular, he identifies accommodation, logistics, and alternative assets as property sectors that are set to benefit from economic tailwinds this year. MacDonald notes that countries such as Australia, Japan, Singapore, and Auckland in New Zealand are currently experiencing high levels of liquidity, and these markets are the primary focus for BlackRock this year.
Compared to 2022 and 2023, MacDonald believes that investor sentiment this year will be more positive, prompting institutional investors to hold discussions about deploying and recycling capital in selective Asia Pacific real estate markets. In Singapore, BlackRock has been targeting serviced apartment properties, making two acquisitions last year. The company partnered with YTL Corp to buy Citadines Raffles Place for around $290 million in October and teamed up with Hong Kong-based accommodation operator Weave Living to purchase Citadines Mount Sophia for $148 million in February 2024.
This week, the Weave Living-operated property reopened as the Weave Suites – Hillside, offering 175 rooms. MacDonald explains that the recent acquisitions in Singapore reflect BlackRock’s belief that there is a shortage of new serviced apartments in the city-state despite high demand for this type of accommodation. He adds that rather than acquiring assets to build a portfolio, the company is focusing on targeting deals to increase value. “We prefer existing properties that we can refurbish and reposition in partnership with our partners and add value through new amenities,” says MacDonald.
According to MacDonald, Singapore remains a top destination for capital and high-skilled labor, which has supported the country’s strong business growth. BlackRock remains optimistic about investment opportunities in Singapore. Additionally, MacDonald notes that Japan will continue to be a target for many real estate investors this year. The company is bullish on the Japanese economy based on its analysis of domestic pricing power, wage growth, and corporate reform, all of which have contributed to growth in the real estate sector.
Daigo Hirai, Head of Japan Real Estate at BlackRock APAC, highlights that a combination of factors, including wage increases and a rise in construction costs, has led to strong rent growth in the Japanese residential market in recent quarters. He adds that the company expects a 7% to 8% increase in residential rents in major Japanese cities such as Tokyo and Osaka this year. Additionally, there has been an uptick in demand for larger-sized apartment units, with tenants preferring to move away from compact units such as studios.
BlackRock aims to partner with an experienced accommodation operator to implement a hybrid residential investment strategy that caters to both inbound tourist accommodation needs and domestic rental demand. This would allow the company to expand its investment presence in popular tourist cities such as Kyoto and Fukuoka. The company sees assets close to train stations in residential-commercial neighborhoods such as Osaka’s Namba district and smaller developments with up to 50 units as fitting this strategy. Hirai points out that the optimal acquisition size is between JPY1 billion ($8.93 million) and JPY3 billion to facilitate BlackRock’s exit strategy. “To succeed in Japan, we need to have specialist teams on the ground to identify potential acquisition deals at discounted prices,” says MacDonald. He adds that the company’s focus in Japan is on residential assets.
Meanwhile, Ben Hickey, Head of Australia Real Estate at BlackRock, says that long-term population growth prospects support positive long-term growth across most sectors of the Australian real estate market. He adds that most property sectors in the country face a shortage of supply and maintain low vacancy rates. According to Hickey, any investment strategy in Australia should assess whether rental growth can outpace inflation, the ongoing supply-demand imbalance, and a favorable exit strategy. As a result, BlackRock is focusing on niche asset classes in Australia, including childcare properties, last-mile logistics assets, life science real estate, and self-storage properties.
When it comes to investing in real estate, it is crucial for international investors to be well-informed about the regulations and limitations surrounding property ownership in Singapore. Compared to landed properties, condos are generally more accessible for foreign buyers as they have fewer ownership restrictions. However, it is important to note that foreign purchasers are required to pay the Additional Buyer’s Stamp Duty (ABSD) of 20% for their first property. Despite the added expenses, the stability and potential for growth in the Singapore real estate market continue to make it a desirable location for foreign investment. Interested in purchasing a Singapore Condo? Understanding the regulations and costs beforehand is crucial in making a well-informed decision.
Hickey notes that Australia’s long-term population growth has created a supply-demand imbalance in these four asset types, which is absent in the broader regional markets. This provides an opportunity for BlackRock to generate strong returns with minimal risk, without relying on a favorable interest rate outlook.
In summary, investors are increasingly interested in deploying capital into Asia Pacific real estate markets with high levels of liquidity. In particular, BlackRock is targeting Australia, Japan, Singapore, and Auckland in New Zealand this year, with a focus on accommodation, logistics, and alternative assets. The company’s strategy is to target deals that increase value in partnership with existing operators, rather than building a portfolio from scratch. In Japan, BlackRock sees opportunities for growth in the residential market, while in Australia, it is focusing on niche asset classes that are undersupplied in the country but have high demand.