Investment in Asia-Pacific real estate is poised for another strong year in 2020, after recording 10% year-on-year growth to US$125 billion in the first three quarters of 2019, according to JLL.
Foreign investment in the sector reached a decade-high in 2019, making up 35% of the total in Asia-Pacific, mostly driven by private equity funds and large transactions, the international real estate consultancy said.
"Real estate in Asia-Pacific has gained favour as investors continue to seek high yields and stability amid a climate of geopolitical uncertainty and slowing economic growth," said Stuart Crow, chief executive for capital markets in Asia-Pacific with JLL.
"As an increasing amount of capital is being allocated to real estate, we're seeing more clients making larger-scale investments to expand their portfolios. Over the next two years, we expect global real estate transaction volumes to stay elevated and Asia-Pacific to outperform Europe and the Americas with an outsized portion of global investor interest."
JLL has identified five key trends investors should look for in 2020.
1. Logistics assets a hot ticket: Investor appetite for logistics continues to pick up, but these types of facilities are held tightly. As a result, investors must become more creative to secure quality assets.
"We're seeing more investors form joint ventures with major established players," said Mr Crow. "Some are taking partial stakes or even going into public markets. A recent example is the cornerstone investment by the Canadian pension fund Omers in the ESR logistics platform when the latter filed to be listed on Hong Kong's stock exchange.
"Another avenue has been via mergers and acquisitions, with the likes of the warehouse operator GLP, Viva Industrial REIT and Propertylink REIT among some of the larger platforms to be acquired."
2. REITS are one to watch: Real estate investment trusts in Asia-Pacific raised a record $14 billion last year, surpassing the previous record of $13.8 billion in 2013.
JLL predicts Singapore and India will see more REIT initial public offerings in 2020, driven by their focused growth strategies and consistent trading performance. More strategic M&A will allow funds to grow geographically and deepen their investments into newer markets in the US and Europe.
"Size matters and we can expect to see more consolidation in this sector," said Mr Crow.
3. Sustainability initiatives: The next generation of buildings is set to become more green, with sustainable technologies to save on operating costs as well as innovative design to attract more occupiers and tenants, said JLL. For example, Singapore-listed Keppel REIT recently obtained a green loan facility to expand its green building portfolio.
"We believe governments in this region are sustainability-conscious and proactive in transforming their cities to make them smarter and more liveable," he said. "These initiatives present opportunities for astute real estate investors, either by acquiring or developing sustainable assets, or being a part of the city redevelopment process."
Singapore, for instance, is moving to decentralise its central business district (CBD), encouraging the redevelopment of older office buildings into mixed-use integrated developments, and reducing the use of private transport. Similarly, Beijing has restricted the size of commercial developments in the central area and aims to reduce the population in its six central districts by 15% from 2014 levels.
4. Innovative cities dominate office markets: According to JLL's latest Premium Office Rent Tracker, technology firms -- particularly online platforms -- are playing a greater role in driving up rents for premium offices, which have previously been the domain of the banking and financial services industry. This is particularly the case in innovation-rich cities such as Beijing, Tokyo, Seoul, Shanghai, Singapore and Osaka.
Like real estate investors, corporate occupiers are attracted to locations with sophisticated innovation ecosystems. These cities sustain highly skilled workforces and are best placed to succeed in the global marketplace.
"Beijing's office market will become a hot-spot for investors next year as it has a strong talent pool supported by a deep-rooted innovation ecosystem," said Mr Crow. "It has nurtured the most unicorns outside of Silicon Valley and is the third largest destination for venture capital funding."
5. Flex space boom continues: Collaborative and agile workspaces are expected to increase from 19% of corporate commercial property portfolios worldwide in 2018 to around 30% this year, according to a JLL survey of 560 corporate real estate leaders.
The firm predicts flex spaces could expand in key gateway cities such as Singapore, Tokyo and Sydney, where demand continues to be high and there is room for more co-working operators and serviced offices to grow.
"Landlords and developers are likely to maintain their partnerships with co-working operators or serviced offices, and some will create their own flex space offerings to keep up with tenants' changing needs," said Mr Crow.