BlackRock sees Asia Pacific real estate markets with high liquidity and strong tailwinds
According to Hamish MacDonald, Head and Chief Investment Officer of APAC Real Estate at BlackRock, investors are showing a growing interest in investing in Asia Pacific real estate markets characterized by high levels of liquidity. This will be particularly beneficial for the accommodation, logistics, and alternative asset sectors.
MacDonald notes that countries like Australia, Japan, Singapore, and Auckland in New Zealand are expected to see high levels of liquidity this year. These markets will be BlackRock’s focus in 2024, as they continue to see positive investor sentiment, with institutional investors beginning to discuss deploying and recycling capital in selective Asia Pacific real estate markets.
In Singapore, BlackRock has been acquiring serviced apartment properties and has partnered with YTL Corp to purchase Citadines Raffles Place for around $290 million in October 2023. In February 2024, BlackRock teamed up with Hong Kong-based accommodation operator Weave Living to acquire Citadines Mount Sophia for $148 million. This property has recently reopened as the 175-room Weave Suites – Hillside.
MacDonald explains that these recent acquisitions reflect BlackRock’s belief that there is a shortage of new serviced apartment supply in Singapore, but the demand for this type of accommodation is high. He adds that BlackRock will focus on targeted deals rather than building an aggregated portfolio, preferring to refurbish and reposition existing properties with a partner and adding new amenities.
Singapore remains an attractive market for investors due to its strong business growth and continual inflow of capital and high-skilled labor, says MacDonald. He adds that BlackRock remains optimistic about opportunities in Singapore.
It is crucial for international investors to have a clear understanding of the regulations and limitations surrounding property ownership in Singapore. Unlike landed properties, which have more stringent rules, foreigners are generally permitted to purchase condos with considerably fewer restrictions. Nevertheless, foreign buyers are still accountable for the Additional Buyer’s Stamp Duty (ABSD) at a rate of 20% for their initial property acquisition. Despite this added expense, the consistent stability and promising potential for growth of the Singapore real estate scene remain a strong draw for foreign investment. Singapore Condo is a popular option for foreign investors looking to enter the Singapore property market.
In Japan, BlackRock sees significant potential for real estate investment. Daigo Hirai, Head of Japan Real Estate at BlackRock APAC, notes that a combination of factors, including wage increases and rising construction costs, have led to a relatively strong rental uplift in the Japanese residential market. BlackRock expects a 7% to 8% increase in residential rents across major Japanese cities like Tokyo and Osaka this year. They have also noticed a trend of tenants opting for larger sized apartments over compact studios.
BlackRock plans to partner with an experienced accommodation operator to manage a hybrid residential investment strategy that caters to both inbound tourist accommodation needs and domestic rental demand. This will allow BlackRock to deepen its investment presence in tourist-dominated cities like Kyoto and Fukuoka. They are targeting assets near train stations in residential-commercial neighborhoods like Osaka’s Namba district.
Ben Hickey, Head of Australia Real Estate at BlackRock, explains that Australia’s long-term population growth estimates support positive long-term growth across most sectors in the real estate market. He adds that most property sectors in Australia are characterized by under-supply and low vacancy rates. BlackRock is focusing on niche asset classes in Australia, such as childcare properties, last-mile logistics assets, life science real estate, and self-storage properties. These sectors benefit from Australia’s long-term population growth and are “chronically undersupplied,” allowing BlackRock to generate outsized returns with limited risk.