Investors Eye High Liquidity Real Estate Markets Apac Blackrock

There are more opportunities offshore in countries like Japan where low expectations on rental growth have resulted in very attractive risk-reward dynamics, he adds. Investors are expressing increased interest in Asia Pacific’s highly liquid real estate markets, according to Hamish MacDonald, BlackRock’s APAC Real Estate head and Chief Investment Officer. He added that this year, the hospitality, logistics, and alternative asset industries are expected to benefit from economic tailwinds. “This year, our focus will be mainly on Australia, Japan, Singapore, and Auckland, New Zealand, where there is an abundance of liquidity,” MacDonald stated.BlackRock has set its sights on purchasing serviced apartments in Singapore, partnering with YTL Corp to acquire Citadines Raffles Place for about $290 million last October. In February 2024, it teamed up with Hong Kong-based accommodation operator Weave Living to purchase Citadines Mount Sophia for $148 million. Weave Suites – Hillside, a 175-room facility operated by Weave Living, reopened its doors this week. “Our recent acquisitions in Singapore reflect our belief that there is a shortage of new serviced apartment offerings in the country, yet the demand for this type of accommodation is high,” MacDonald explained.The firm intends to target acquisitions that are more targeted, rather than attempting to create a diversified portfolio. “We prefer existing assets that we can refurbish and reposition in collaboration with a partner, as well as add value by introducing new amenities,” MacDonald stated.MacDonald added that Singapore continues to be an appealing market for investment, attracting substantial capital inflows and highly skilled labor due to the country’s robust business growth. “We continue to see numerous possibilities in Singapore.”Japan, according to MacDonald, will remain a popular destination for real estate investors this year. “Based on our analysis of domestic pricing power, wage growth, and corporate reform, we are optimistic about the Japanese economy and the opportunities it presents for real estate growth.” In recent quarters, a combination of factors, including wage increases and escalating construction expenses, have boosted rental income in Japan’s residential market, according to Daigo Hirai, head of BlackRock APAC’s Japan real estate division. “We expect a 7% to 8% increase in residential rents across major Japanese cities such as Tokyo and Osaka this year in general,” Hirai stated.Hirai believes that BlackRock will benefit from partnering with a skilled accommodation operator to manage a mixed residential investment approach that addresses both inbound tourist accommodation demands and domestic rental requirements. This will allow BlackRock to increase its investment presence in tourist-heavy cities such as Kyoto and Fukuoka.“Assets located near train stations in residential and commercial hubs like Osaka’s Namba district, as well as smaller developments with up to 50 units, are examples of properties that fit this strategy,” Hirai explained. He also stated that the business will consider purchasing assets worth between JPY1 billion ($8.93 million) and JPY3 billion to support their exit strategy.MacDonald stated that BlackRock’s approach in Japan focuses on residential real estate. “To identify attractive acquisition opportunities, we utilize specialist field teams, and for us, operating in Japan entails deploying these personnel resources,” MacDonald said.Long-term population growth projections continue to support favorable long-term growth in most asset categories in the Australian real estate market, according to Ben Hickey, head of BlackRock’s Australian Real Estate team. “The majority of property sectors in Australia are characterized by low underlying supply and low vacancy rates.”Hickey believes that any investment approach should account for whether rental growth will exceed inflation, the ongoing structural supply-demand mismatch, and an advantageous exit strategy. As a result, the company is focusing on niche property types in Australia, such as child care properties, last-mile logistics properties, life science real estate, and self-storage facilities.Hickey stated that these four asset types are expected to benefit from long-term population growth in Australia and are “chronically undersupplied” compared to other regional markets. “This enables us to achieve above-average returns with minimum risk; we cannot rely on a favorable interest rate environment to generate real estate returns,” he explained. While there may be more opportunities overseas, such as in Japan, where weak expectations on rental growth have resulted in favorable risk-reward dynamics, he added.