Overall commercial property transaction volumes in Asia Pacific are forecasted to rise by 5.0 percent for the whole of 2019, but the growth momentum could slow down, according to property consultancy JLL.

“A decade into the economic cycle, investors are contending with macro risks and geopolitical uncertainty such as rising interest rates, continued trade tensions between the US and China, as well as strains in the EU caused by Brexit negotiations,” said Stuart Crow, head of capital markets at JLL Asia Pacific.

“Against this backdrop, real estate continues to look attractive as a safe haven for investments, with its portfolio diversification benefits and relatively higher returns compared to other asset classes.”

In particular, the growth of the region’s commercial property market is expected to be driven by four key trends – co-working space, logistics and data centres, alternative residential assets, and smart cities.

For instance, companies are increasingly taking advantage of versatile office space in a bid to attract talent and foster innovation among employees.

“By 2030, flexible work spaces could comprise 30 percent of some corporate commercial property portfolios worldwide,” said Megan Walters, head of Asia Pacific Research at JLL.

“This means that market consolidation will become more common – landlords and developers will start to create their own flexible space offerings, form joint ventures with co-working providers, or look at mergers and acquisitions among co-working brands.”

Other industry catalysts are logistics and data centres, which are expected to benefit greatly from booming online sales, with Asia Pacific’s e-commerce market projected to grow to US$1.6 trillion by 2021.

“The robust rate of consumption is driving increasing investor interest into data centres and logistics in Asia Pacific. These sectors will continue to expand, with significant capital targeting emerging markets like China, India and Indonesia. Meanwhile, logistics hubs in major cities are growing. As an example, the logistics market in Sydney increased seven-fold between 2015 and 2017,” noted Crow.

Moreover, Asia Pacific’s urban population is forecasted to surpass 400 million people by 2027, while those aged 65 and above are expected to increase by 146 million people over the next 10 years.

Among the types of properties to bank on this demographic trend are alternative residential assets like co-living spaces, multi-family properties, student accommodations, nursing homes and aged care facilities.

These new sectors are set to outperform traditional residential assets given their efficient use of space, superior building management, and generally higher entry yields. Aged care, for instance, offers returns of 11 to 14 percent in Tokyo and 8.0 to 12 percent in Singapore, said Crow.

Finally, the smart city initiatives pushing ahead in Singapore, Australia, South Korea, Japan and elsewhere in the region are leading to greater demand for better digital infrastructures, as well as more green features to enhance living conditions.

“Proptech – the convergence of real estate and technology – plays a key role in the future development of cities. As smart cities are highly data-driven, smart property development and management enable extensive data collection and analytics –both of which are crucial for cities to create more liveable environments for their growing populations,” noted Walters.

Source: 10 January 2019, CommercialGuru