According to The Investor JLL, 84 percent of real estate investors expect transaction volumes in the Asia Pacific to rebound meaningfully by early 2021, based on a JLL poll of 38 global investors representing close to US$2 trillion in assets under management. Optimism is being further buoyed by signs of a sustained recovery in China. Select investors remain more bullish, with 32 percent confident that the market hit its trough in the first half of 2020.
“Believe it or not, investors aren’t mired in doom and gloom,” says Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL. “There are challenges, but many are looking ahead to refocus their Asia Pacific investment strategies on core geographies and sectors that are benefiting from the acceleration of pre-COVID trends.”
Defensive locations and sectors are among the highest in demand, he says. Japan and South Korea remain top of the list, as do sectors such as multifamily, non-discretionary retail, and logistics. The survey identified Japan, South Korea, China, and Australia as the markets most likely to see an increase in transactional activity into 2021 as investors turn to core geographies as a defensive strategy to mitigate ongoing risk.
The relative stability and transparency of the Japanese market as the world’s third-largest economy sees 56 percent of those surveyed planning to increase their exposure in 2021, cementing its status as a safe-haven destination, where income and capital value returns are relatively more stable. Meanwhile, despite China’s domestic economy slowing before COVID-19, investors polled are looking past short-term headwinds to the longer-term growth potential of the market, with 51 percent planning on increasing their exposure to the country within 2021.
“As transactional activity increases and pockets of value emerge from the crisis, we expect investors to move up the risk curve, which will include both direct and indirect exposure to real estate,” says Crow.
Although direct acquisition in private markets will remain the primary route for most investors polled, many are increasingly looking towards different transaction structures to gain and increase their exposure to real estate. Sizable numbers of investors are planning to increase exposure to platform deals (32%) or increase their activity in debt markets (29%).
“COVID-19 is changing how investors access real estate,” says Roddy Allan, Chief Research Officer, Asia Pacific, JLL. “While we typically see a shift to more stable risk profiles during times of uncertainty, many investors are signalling a longer-term diversification strategy in Asia Pacific but are also reimagining how they transact in this region.”