Real estate outlook 2022: Niche asset classes boost returns | Fund managers

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Historically, the most favored sectors of the Asia-Pacific (Apac) real estate markets have been the office and retail sectors, which currently represent some 66% of investor portfolios in the region, according to the latest report. from the Urban Land Institute (ULI). For 2022, experts see more potential in Australia, Japan and South Korea in different niche sectors.

Louise kavanagh

South Korean logistics are still under-supplied, with a population concentrated around the Seoul Basin and domestic and foreign occupiers seeking to enter the market. In Apac, sectors such as logistics, data centers, life sciences and collective housing remain in high demand, given their stable income and favorable winds, according to Louise Kavanagh, director of investments. and Head of Fund Management for Apac at Nuveen Real Estate..

“Niche sectors will offer a way to generate higher returns in the short term, [including] those involved in telecommunications, pharmaceuticals, biotechnology, new energy, data, e-commerce, ”Kavanagh said. “[Same goes for sectors] focusing on demographic changes like the need for retirement and care homes in markets like Japan and Australia, where there are large [aging] populations with discretionary spending capacities.

FOCUS ON RECOVERY

Simon Wallace, DWS

“Australia appears to be well positioned for a strong recovery over the next few years. With some of the region’s fastest growing cities having experienced a larger than average price correction, cities like Melbourne and Sydney appear to be well positioned, ”said Simon Wallace, co-head of property research at DWS. Asian investor.

“Elsewhere in the region, we see potential for outperformance in fast growing cities like Fukuoka, regional logistics markets like Busan, and emerging locations like Pangyo in Seoul and North Sydney,” he added.

He believes the market is now in a period of recovery, experiencing both rising rents and squeezing yields. “We see this recovery stretching into 2022 and beyond, like a wall of capital that pivots into the industry,” Wallace said.

ON ALERT

The risk to occupants has always been a concern, but the risk will be even higher as we emerge from the pandemic.

“The past two years have strained many businesses, but unlike previous recessions, we have yet to see an increase in insolvencies. However, this is clearly a risk, especially as support mechanisms are disappearing. Understanding our tenants and the quality of income that underpins our portfolios is even more important today, ”continued Wallace.

In the long run, Wallace doesn’t think the pandemic has fundamentally changed the outlook for real estate.

“Factors such as e-commerce, remote working and commuter migration have been shaping demand for years and will continue to do so. However, these trends have accelerated and it is therefore important that our portfolios are well positioned for these structural changes. Globally, portfolios overweighted in residential [assets] and logistics certainly appear to be in a good position for years to come, ”he said.

SECTOR BY SECTOR

Logistics assets have outperformed significantly in Apac and will continue to do so relative to Europe and North America, while commercial assets have consistently underperformed, particularly in the US and Europe.

This trend contrasts sharply with the period immediately after the global financial crisis, when yield spreads were mostly along geographic lines and asset quality, according to another report from Nuveen.

The report noted that there will be less performance variance between property types going forward, since investment performance differentials have been along sector lines for the past two years.

HIRE NOW

The preference for real estate was also reflected in the hiring frenzy and quick acquisitions.

According to an ANREV / PwC report on real estate fund managers, 42% of respondents expect their workforce to be stable or increasing, indicating a positive outlook for the sector.

On December 13, Nuveen Real Estate (AUM: $ 144 billion) acquired a 50% stake in One George Street, a Class A office building in Singapore, for $ 472 million. He also expanded the Apac team by adding David Chan to lead real estate transactions for Greater China in October.

Nuveen (AUM: $ 1.3 trillion) manages about $ 270 billion for its parent company, the United States-based Teachers’ Insurance and Annuity Association.

More pieces on New Year’s outlook:

Real estate and manufacturing in India enter the upward cycle

Digital Asset Outlook 2022: All Eyes On Regulation As Capital Flows

Inflation outlook 2022: weathering the storm with real assets

Chinese Asset Outlook 2022: Fragile Credit and Volatile A Shares


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