There is a growing interest among investors to invest in real estate markets in Asia Pacific that have high liquidity, according to Hamish MacDonald, head and chief investment officer of APAC Real Estate at BlackRock. He has identified three property sectors – accommodation, logistics, and alternative assets – that are likely to benefit from economic tailwinds this year. MacDonald reveals that countries such as Australia, Japan, Singapore, and Auckland in New Zealand are the top choices of BlackRock for investments this year.
MacDonald predicts a more bullish investor sentiment this year compared to the past two years, with institutional investors showing more interest in discussing the allocation and recycling of capital in selective Asia Pacific real estate markets. In Singapore, BlackRock has been targeting serviced apartments and has recently formed a partnership with YTL Corp to buy Citadines Raffles Place for around $290 million. The firm has also teamed up with accommodation operator Weave Living to acquire Citadines Mount Sophia for $148 million in February 2024, which has since reopened as Weave Suites – Hillside.
MacDonald says that BlackRock’s strategy is not to build a portfolio but to carefully target acquisitions. They prefer existing properties that can be refurbished and repositioned with the help of a partner, and also value-added with new amenities. According to MacDonald, Singapore continues to attract high-skilled labour and capital, thanks to its strong business growth, making it a highly favourable market for investment. In Japan, BlackRock remains bullish on the economy and the real estate market, citing factors like domestic pricing power, wage growth, and corporate reforms as key drivers of growth. Daigo Hirai, head of Japan real estate at BlackRock APAC, predicts a 7% to 8% increase in residential rents across major cities like Tokyo and Osaka this year, and says that tenants prefer larger units over small studios.
BlackRock’s preferred strategy in Japan is to partner with an experienced accommodation operator to manage a hybrid residential investment strategy, focusing on inbound tourist accommodation and domestic rental demand. This would help BlackRock establish a strong investment presence in tourist-dominated cities like Kyoto and Fukuoka. Hirai shares that BlackRock will be targeting assets close to train stations in residential-commercial neighbourhoods and smaller developments in the range of JPY1 billion to JPY3 billion. MacDonald adds that the company’s key to success in Japan is deploying specialist ground teams that can identify potential deals at a significant discount.
Ben Hickey, Head of Australia Real Estate at BlackRock, believes that long-term population growth estimates will continue to support positive growth across most sectors in the Australian real estate market. He adds that most property sectors in Australia are typically characterised by under-supply and low vacancy rates. Hickey says that any investment strategy should focus on rental growth surpassing inflation, a favourable supply-demand balance, and a good exit strategy. BlackRock is currently focusing on specific niche asset classes in the country like childcare properties, last-mile logistics assets, life science real estate, and self-storage properties. These property types are expected to benefit from Australia’s long-term population growth and a relatively low supply compared to other regional markets, potentially generating higher returns with lower risk.