APAC real estate markets are seeing an influx of capital this year, with investors showing a particular interest in the property sectors of accommodation, logistics, and alternative assets, according to Hamish MacDonald, head and chief investment officer of APAC Real Estate at BlackRock. He also predicts that investor sentiment will be more bullish this year compared to 2022 and 2023, with institutional investors initiating discussions about deploying and recycling capital in selective Asia Pacific real estate markets.
BlackRock has been focusing its acquisitions in Singapore on the serviced apartment sector, partnering with YTL Corp to purchase Citadines Raffles Place for about $290 million last October. It has also teamed up with Hong Kong-based accommodation operator Weave Living to acquire Citadines Mount Sophia for $148 million in February 2024. The newly renovated Weave Suites – Hillside, with 175 rooms, reopened its doors this week. MacDonald explains that these acquisitions reflect their belief that there is a shortage of new serviced apartment supply in Singapore, but a high demand for this type of accommodation.
While BlackRock remains positive on opportunities in Singapore, MacDonald also sees Japan as a key market for real estate investors. The firm is bullish on the Japanese economy, based on their analysis of domestic pricing power, wage growth, and corporate reform, which collectively support growth in real estate. According to Daigo Hirai, head of Japan real estate at BlackRock APAC, the firm expects a 7% to 8% increase in residential rents across major Japanese cities like Tokyo and Osaka this year. He also adds that tenants are starting to favor larger apartment units over studios, supporting a relatively strong rental uplift in the Japanese residential market.
BlackRock is also looking to enter the hybrid residential investment market in Japan, which caters to both inbound tourist accommodation needs and domestic rental demand. They plan to partner with an experienced accommodation operator to manage this strategy and focus on tourist-dominated cities such as Kyoto and Fukuoka. Hickey says that long-term population growth estimates support positive growth across most sectors in the Australian real estate market. As a result, BlackRock is investing in niche asset classes in Australia, including childcare properties, last-mile logistics assets, life science real estate, and self-storage properties, which are “chronically undersupplied” compared to other regional markets and have high growth potential. Their focus is on generating outsized returns with limited risk, as they cannot rely on a favorable interest rate outlook to generate real estate returns.