Unlocking value in an evolving landscape: Key messages for Asia-Pacific

Environmental, social and governance (ESG) factors are at the forefront of every investor’s real-estate strategy. We see value in opportunities that help to reduce environmental impacts and are likely to support long-term values and ensure fair, transparent and inclusive business standards.

The CBD office will not hollow out. Good-quality offices in city fringe or metro sub-markets can cater to the hub-and-spoke shifts in tenant demand. We remain positive that office assets will benefit from flight to quality in markets such as Sydney, Melbourne and Singapore. There is scope to capture long-term premiums through value-add initiatives such as state-of-the-art ventilation or layout redesign that support flexible working needs.

Logistics assets close to population catchments and along transport links will outperform in most key markets, even in the face of new supply. The reshoring of production functions could divert and increase demand for well-located first-mile logistics facilities in export powerhouses such as Japan and South Korea. Build to core and value-add strategies may pay off in markets where the stock of modern logistics lags behind the growth in demand, though access to land and stock remains a challenge. We see cold-chain logistics as increasingly critical, as online purchases of perishables and pharmaceuticals become commonplace in Asia-Pacific.

We think intrinsic value can be unlocked through the selective repositioning of underperforming retail assets to alternate uses, although location remains key. Essential retail formats that are weighted towards non-discretionary trading have proved to be resilient before and during the pandemic and will continue to do well.

Japanese multifamily homes will see continued resilience, especially in the key metropolitan areas that benefit from both lifestyle aspirations and employment opportunities. We think repriced hotel assets in markets with deep domestic travel demand – such as Australia, New Zealand and Japan – offer a structural inroad into post-pandemic hospitality. We are selectively positive on data centres, healthcare assets and self-storage facilities on the back of socio-demographic changes across the region.

We think the funding gap in Australia offers a risk-adjusted opportunity to underwrite real-estate debt, backed by strong underlying property assets.