Although Asia-Pacific is expected to account for only 15 per cent within the global context, investor appetite for Asian properties has never been bigger. The rapid regional economic growth, yield compression worldwide, diversification requirements by institutional investors, and the introduction of real estate investment trusts (Reits) have all been crucial in attracting investments to the region.
In addition, in the relentless pursuit of globalisation, many global corporations have relocated their manufacturing and business support activities to Asia, with China and India being the most popular destinations. In China for example, labour costs, property prices and cost of living in first tier cities such as Beijing and Shanghai have been increasing substantially over the past decade, some manufacturers are now relocating to second tier locations in an attempt to keep their overheads low. As a result, development opportunities in these less familiar places are currently attracting huge attention from investors around the world.
Most property markets in Asia are on the up, although some growth is moderating due to over supply. The overall outlook for the region remains positive. The growing importance of China in global manufacturing, the sustainable economic recovery in Japan and the stable environment for merchandise exports in Singapore and Hong Kong are making logistics facilities in these countries very attractive to investors looking to secure a steady income stream and reasonable capital growth.
For investors seeking to implement a higher risk higher return strategy, there are plenty of opportunities in China for speculative development, built-to-suit, and asset enhancement. Projects relating to middle class residential apartments and large scale shopping centres are particularly popular because of the projected steady increase in living standards.
Apart from direct property investments, the indirect market has also been expanding rapidly in Asia. The listed Reit market only started in Asia five years ago but has now grown to a market capitalisation of some $65bn, not to mention the equally popular non-listed segment which is slightly larger than the listed market in terms of capitalisation.
John Su is director of Asian research at Arlington Securities.
