Investors are showing a strong interest in deploying capital into Asia Pacific real estate markets with high levels of liquidity, according to Hamish MacDonald, head and chief investment officer of APAC Real Estate at BlackRock. This year, it is expected that the accommodation, logistics, and alternative assets sectors will benefit from the economic tailwinds, MacDonald says. “The countries and property markets in this region that have abundant liquidity this year include Australia, Japan, Singapore, and Auckland in New Zealand. This is also the order of focus for BlackRock this year,” he adds.
Compared to 2023 and 2022, MacDonald expects investor sentiment this year to be more bullish, with institutional investors initiating more discussions about deploying and recycling capital in selective Asia Pacific real estate markets.
BlackRock has concentrated its acquisitions in Singapore on serviced apartment properties, partnering with YTL Corp to purchase Citadines Raffles Place for about $290 million last October. This was after it joined forces with Hong Kong-based accommodation operator Weave Living to purchase Citadines Mount Sophia for $148 million in February 2024.
The Weave Living-operated property reopened this week as the 175-room Weave Suites – Hillside. “Our recent acquisitions in Singapore demonstrate our belief that there is a lack of new serviced apartment supply in the city-state, but the demand for this type of accommodation is high,” MacDonald says.
He adds that the focus will not be on acquiring assets to build an aggregated portfolio, but on targeting specific deals. “We prefer existing properties that we can reposition and refurbish with a partner, adding value with new amenities,” he says.
According to MacDonald, Singapore continues to attract substantial inflows of capital and highly skilled labour, which accompany the country’s strong business growth. “We continue to be very positive about opportunities in Singapore,” he adds.
MacDonald also says that Japan will remain a target for many real estate investors this year. “We are bullish about the Japanese economy based on our analysis of domestic pricing power, wage growth, and corporate reform, which collectively support growth in real estate.” In recent quarters, a combination of factors, including wage increases and an increase in construction costs, have supported relatively strong rental growth in the Japanese residential market, according to Daigo Hirai, Head of Japan Real Estate at BlackRock APAC.
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“In general, we expect a 7% to 8% increase in residential rents across major Japanese cities such as Tokyo and Osaka this year. Tenants have also started to prefer bigger apartment units over compact units like studios,” adds Hirai.
BlackRock is looking to partner with an experienced accommodation operator to manage a residential investment strategy that captures both inbound tourist accommodation needs and domestic rental demand. This would help the firm to strengthen its investment presence in tourist-dominated cities such as Kyoto and Fukuoka.
“The type of assets that fit this strategy are those near train stations in residential-commercial neighbourhoods such as Osaka’s Namba district and smaller developments with up to 50 units,” Hirai says, adding that the firm will consider acquisitions ranging from JPY1 billion to JPY3 billion to accommodate its exit strategy.
“For us to operate in Japan, it is critical to have specialist ground teams who can identify potential acquisition deals at a significant discount,” MacDonald explains, adding that the firm’s focus in Japan is on residential assets.
Meanwhile, Ben Hickey, Head of Australia Real Estate at BlackRock, says that long-term population growth estimates continue to support positive long-term growth across most sectors in the Australian real estate market. “Most property sectors in Australia are typically characterised by low vacancy rates and undersupply.”
Hickey says any investment strategy in Australia should consider whether rental growth can outpace inflation, the persistent long-term supply-demand imbalance, and a viable exit strategy. As a result, the firm is focusing on niche asset classes in Australia, including childcare properties, last-mile logistics assets, life science real estate, and self-storage properties.
“These four asset types benefit from Australia’s long-term population growth and are generally undersupplied compared to broader regional markets, allowing us to generate outsized returns with limited risk. We cannot rely on a favourable interest rate outlook to generate our real estate returns,” explains Hickey.