Liquidity-rich Asia Pacific real estate markets are attracting a lot of interest from investors, according to Hamish MacDonald, head and chief investment officer of APAC Real Estate at BlackRock. He believes that this year, property sectors such as accommodation, logistics, and alternative assets will benefit from positive economic conditions.
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MacDonald states that countries like Australia, Japan, Singapore, and Auckland are seeing abundant liquidity and are therefore the main focus for BlackRock this year. He expects investor sentiment to be more optimistic compared to the previous two years, with institutional investors discussing opportunities to invest and recycle capital in selected Asia Pacific real estate markets.
BlackRock has been active in Singapore, with its latest acquisition being the serviced apartment property Citadines Raffles Place for $290 million in October 2022. The company also partnered with Hong Kong-based accommodation operator Weave Living to purchase Citadines Mount Sophia for $148 million in February 2024. The property reopened this week as Weave Suites – Hillside with 175 rooms. According to MacDonald, these acquisitions reflect BlackRock’s belief that there is a demand for serviced apartments in Singapore, but a lack of new supply. MacDonald also states that instead of building a portfolio, BlackRock prefers to focus on deals that provide added value with new amenities through partnerships with property owners.
Singapore remains an attractive location for investment, with a strong influx of capital and highly-skilled labour supporting the growth of the business sector. MacDonald says that BlackRock remains positive about investment opportunities in Singapore.
In Japan, which remains a top target for real estate investors, BlackRock believes that the economy is set to grow due to factors such as domestic pricing power, wage growth, and corporate reform. This, in turn, will support growth in the real estate market. Daigo Hirai, head of Japan real estate at BlackRock APAC, notes that there has been a 7-8% increase in residential rents in major cities such as Tokyo and Osaka in recent quarters. Tenants are also choosing larger units over compact ones, which is a positive trend for the residential market. BlackRock aims to partner with an experienced accommodation operator to manage a hybrid residential investment strategy that caters to both inbound tourists and domestic renters. This will allow the company to expand its presence in tourist-dominated cities like Kyoto and Fukuoka. They will focus on acquiring small developments with up to 50 units and look at properties in the range of JPY1 billion to JPY3 billion.
MacDonald emphasizes the importance of having a specialist ground team in Japan to identify potential acquisition deals at a discounted price. BlackRock’s focus in Japan is mainly on residential assets.
Meanwhile, in the Australian market, the long-term population growth outlook is positive for most property sectors. Ben Hickey, Head of Australia Real Estate at BlackRock, states that there is a chronic undersupply of most property types and low vacancy rates in Australia. The company is interested in niche asset classes such as childcare properties, last-mile logistics assets, life science real estate, and self-storage properties. These sectors benefit from long-term population growth and are undersupplied in comparison to the regional market, providing the potential for outsized returns with limited risk.
Hickey emphasizes the need to consider factors such as rental growth, the supply-demand imbalance, and exit strategy when investing in Australia. He adds that BlackRock cannot rely on favorable interest rates to generate real estate returns.