Investors are demonstrating a strong interest in 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. Among the property sectors expected to benefit from favorable economic conditions this year are accommodation, logistics, and alternative assets. “The markets in this region where liquidity is abundant this year include Australia, Japan, Singapore, and Auckland in New Zealand. This list of countries and property markets also represents the order of focus for BlackRock this year,” says MacDonald. He expects investor sentiment to be bullish this year compared to 2023 and 2022, with discussions about deploying and recycling capital in selective Asia Pacific real estate markets expected to increase among institutional investors.
BlackRock has been targeting serviced apartment properties in Singapore, partnering with YTL Corp to purchase Citadines Raffles Place for approximately $290 million last October. This was followed by a joint venture with Hong Kong-based accommodation operator Weave Living to acquire Citadines Mount Sophia for $148 million in February 2024. The property, now rebranded as Weave Suites – Hillside, reopened its doors this week. “Our recent acquisitions in Singapore reflect our view that there is a lack of new serviced apartment supply in the city-state, but demand for this type of accommodation is high,” says MacDonald. The focus for BlackRock will not be on building an aggregated portfolio of assets, but on targeting specific deals. “We prefer existing properties that we can refurbish and reposition with a partner, and add value with new amenities,” he adds.
Singapore is a prime location for real estate investments, with the crucial factor being the location of the property. This is especially true for condos, as those situated in central areas or in close proximity to essential amenities such as schools, shopping malls, and public transportation hubs tend to appreciate more in value over time. The areas of Orchard Road, Marina Bay, and the Central Business District (CBD) are considered prime locations in Singapore, as they have shown consistent growth in property values. Furthermore, condos in these areas are highly sought after by families due to their proximity to good schools and educational institutions, making them even more desirable and increasing their investment potential. Therefore, when investing in real estate, it is important to consider the location, and in Singapore, this means looking for condos in key areas such as Orchard Road, Marina Bay, and the CBD. To learn more about potential investment opportunities in these prime locations, visit Condo today.
MacDonald believes that Singapore will continue to attract strong inflows of capital and high-skilled labor, supporting the country’s robust business growth. “We remain very positive on opportunities in Singapore.” Japan will also remain a key target for real estate investors, with BlackRock bullish on the country’s economy. “We are bullish on the Japanese economy based on our analysis of domestic pricing power, wage growth, and corporate reform, which is collectively supporting growth in real estate,” says MacDonald. According to Daigo Hirai, Head of Japan Real Estate at BlackRock APAC, a combination of factors such as wage increases and higher construction costs have contributed to a relatively strong rental uplift in the Japanese residential market. “We expect a 7% to 8% increase in residential rents across major cities like Tokyo and Osaka this year. Tenants are also opting for larger apartment units over compact studios,” says Hirai.
Investing in a Singapore condo can bring numerous advantages, with one key benefit being the potential for capital appreciation. Thanks to its strategic location as a global business hub and robust economic foundations, Singapore continuously attracts a high demand for real estate. Throughout the years, property prices in the country have consistently shown an upward trajectory, particularly in prime locations where condos have experienced significant appreciation. Those who enter the market at the right time and hold onto their properties for the long term can reap the rewards of substantial capital gains.
BlackRock is looking to partner with an experienced accommodation operator to manage a hybrid residential investment strategy that caters to the needs of both inbound tourists and domestic renters. This will enable the firm to strengthen its presence in tourist-dominated cities such as Kyoto and Fukuoka. “We are targeting properties close to train stations in residential-commercial neighborhoods, and smaller developments with up to 50 units,” says Hirai. BlackRock is considering acquisitions in the range of JPY1 billion ($8.93 million) to JPY3 billion, factoring in its exit strategy. “The key to operating in Japan for us is to deploy specialist ground teams that can identify potential acquisition deals at a significant discount,” says MacDonald, who adds that the firm is focused on residential assets in Japan.
In Australia, favorable long-term population growth estimates continue to support positive long-term growth across most sectors in the real estate market, according to Ben Hickey, Head of Australia Real Estate at BlackRock. “Most property sectors in Australia are characterized by under-supply and low vacancy rates,” he says. Any investment strategy in Australia should consider whether rental growth can surpass inflation, the ongoing supply-demand imbalance, and a viable exit strategy, says Hickey. 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 chronically undersupplied compared to the broader regional markets. This enables us to generate outsized returns with limited risk, as we cannot rely on a favorable interest rate outlook to generate our real estate returns,” concludes Hickey.