Investors Eye High Liquidity Real Estate Markets Apac Blackrock
Investors have shown a greater interest in injecting funds into Asia Pacific real estate markets characterized by ample liquidity, according to Hamish MacDonald, head and chief investment officer of BlackRock’s APAC Real Estate division.Boosted by favorable economic conditions, the real estate sectors expected to see growth this year include accommodations, logistics, and alternative assets. Key markets where liquidity is expected to be plentiful in 2021 include Australia, Japan, Singapore, and Auckland in New Zealand, with BlackRock setting its sights on these countries and markets as its primary focus.Investor sentiment is expected to be notably more bullish this year compared to 2022 and 2023. Institutional investors are eagerly discussing the deployment and recycling of capital in selected Asia Pacific real estate markets in 2021, which is indicative of their increased enthusiasm about the region.Read also: BlackRock’s Latest Acquisition Strategies in SingaporeThe Singapore market has been BlackRock’s main focus in terms of acquisitions, with a primary focus on serviced apartment properties. BlackRock’s acquisitions have been in partnership with YTL Corp, acquiring Citadines Raffles Place for $290 million in October 2020 and purchasing Citadines Mount Sophia for $148 million in February 2024 in another joint initiative with Hong Kong-based accommodation operator Weave Living. Just recently, the Weave Living-operated property reopened as Weave Suites – Hillside, a facility that boasts 175 rooms.MacDonald explains that these recent acquisitions in Singapore were driven by BlackRock’s observation that there is a shortage of serviced apartments and high demand for this type of accommodation. However, he clarifies that their goal is not the development of an aggregated portfolio, but rather the targeted selection of deals in the market.Instead of purchasing properties to build an aggregated portfolio, BlackRock prefers to acquire existing properties for refurbishment and repositioning, as well as the addition of new amenities for enhanced value.Having attracted the influx of high-skilled labour and capital that massively support the strong business growth in the country, Singapore remains an extremely attractive market, according to MacDonald. He states that BlackRock continues to have a positive outlook for opportunities in Singapore.Heading into 2021, MacDonald expects Japan to continue being a primary focal point for many real estate investors. “Our research has led us to believe that the Japanese economy will remain strong, supported by domestic pricing power, wage growth, and corporate reform, which also underpins real estate growth,” he shares.Over the last few quarters, a variety of factors, such as wage increases and construction cost hikes, have contributed to impressive rental upticks in Japan’s residential market. BlackRock’s Head of Japan Real Estate, Daigo Hirai, predicts a rental rise of between 7% and 8% across significant Japanese cities like Osaka and Tokyo in 2021.According to Hirai, tenants are gradually moving away from small studio units, opting for more spacious apartments. BlackRock seeks to establish a partnership with a seasoned accommodation operator to implement a hybrid residential investment strategy that takes into account both domestic rental demand and tourist accommodation needs. By so doing, BlackRock hopes to establish a more significant presence in tourist-driven cities, including Kyoto and Fukuoka.“The kinds of assets that are compatible with this strategy are those situated near train stations within residential-commercial neighborhoods like Namba districts in Osaka, as well as smaller developments with a capacity of up to 50 units,” adds Hirai.BlackRock intends to acquire assets in the $8.93 million to $26.78 million price range as part of its exit strategy. MacDonald explains that their success in the Japanese market can be attributed to their deployment of specialized ground teams who identify potential assets at significant discounts. MacDonald confirms that Japan will continue being BlackRock’s primary focus in terms of real estate assets.BlackRock’s primary focus in Australia has been to exploit the country’s long-term population growth, which, in turn, drives growth in almost all of the region’s sectors. Most property categories in Australia have been characterized by low vacancy rates and a shortage of properties. Extensive evaluation of investment strategies in the region focuses on projected rental growth, long-term demand and supply imbalances, and exit plans, according to BlackRock’s Head of Australia Real Estate, Ben Hickey. That has led the firm to concentrate on niche asset classes in the country, including childcare facilities, last-mile logistics assets, life science properties, and self-storage facilities.These four asset types have been chronically undersupplied both domestically and compared to regional markets, benefiting from Australia’s long-term population growth. Hickey adds that this allows their investments to generate outsize returns with minimal risk, given that favorable interest rates cannot be solely relied upon to generate acceptable real estate returns.
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