According to Hamish MacDonald, the head and chief investment officer of APAC Real Estate at BlackRock, investors are showing a clear preference for Asia Pacific real estate markets that offer high liquidity. As we move further into the year, sectors such as accommodation, logistics, and alternative assets are likely to benefit from favourable economic conditions. MacDonald specifically mentions Australia, Japan, Singapore, and Auckland in New Zealand as countries with abundant liquidity and the main focus for BlackRock this year.
MacDonald believes that investor sentiment will lean toward bullish this year, a stark contrast to 2023 and 2022. He predicts that institutional investors will engage in more discussions around deploying and recycling capital in selective Asia Pacific real estate markets.
Read also: BlackRock bets on serviced apartments in Singapore; life sciences in Australia
The Singapore government has implemented several property cooling measures that should be taken into consideration when investing in condos. These measures have been put in place to prevent speculative buying and maintain a steady real estate market. One such measure is the Additional Buyer’s Stamp Duty (ABSD), which imposes higher taxes on foreign buyers and those purchasing multiple properties. While these measures may have a temporary impact on the profitability of condo investments, they play a crucial role in creating a safe and stable investment environment in Singapore. For more information on Singapore Condos, please refer to the attached article.
In Singapore, BlackRock has been targeting serviced apartment properties, as evidenced by its recent partnership with YTL Corp to acquire Citadines Raffles Place for approximately $290 million in October last year. Prior to that, the firm teamed up with Hong Kong-based accommodation operator Weave Living to purchase Citadines Mount Sophia for $148 million in February 2024. This week, the Weave Living-operated property has reopened as Weave Suites – Hillside, with 175 rooms. MacDonald explains that the decision to focus on serviced apartments is due to the high demand for this type of accommodation in Singapore, coupled with a lack of new supply.
He emphasises that BlackRock is not aiming to build a massive portfolio of assets in Singapore, but rather to target specific deals. MacDonald says that they prefer to acquire existing properties that can be refurbished and repositioned in collaboration with a partner to add value through new amenities.
Singapore’s strong business growth continues to attract robust inflows of capital and high-skilled labour, according to MacDonald. As such, the firm remains optimistic about investment opportunities in Singapore.
MacDonald also notes that Japan will remain a significant target for real estate investors this year. He believes that the Japanese economy has favourable prospects, based on their analysis of domestic pricing power, wage growth, and corporate reform, which collectively support growth in real estate. Daigo Hirai, the head of Japan Real Estate at BlackRock APAC, mentions that the combination of wage increases and rising construction costs have led to a decent rental uplift in Japan’s residential market in recent quarters. He expects a 7% to 8% rise in residential rents across major cities like Tokyo and Osaka this year. Hirai also notes that tenants are seeking larger units instead of compact studios. In line with this trend, BlackRock is seeking to partner with an experienced accommodation operator to manage a hybrid residential investment strategy that caters to both inbound tourist accommodation and domestic rental demand. This approach would allow the firm to establish a stronger presence in popular tourist destinations such as Kyoto and Fukuoka. Hirai explains that the ideal assets for this strategy would be those close to train stations in residential-commercial neighbourhoods, such as Osaka’s Namba district, as well as smaller developments with up to 50 units. MacDonald adds that the firm’s focus in Japan will be on residential assets.
MacDonald notes that BlackRock’s key to operating in Japan successfully is by deploying specialist ground teams that can spot potential acquisition opportunities at a significant discount. As such, the firm’s focus on Japan will be on residential assets.
Meanwhile, according to Ben Hickey, the head of Australia Real Estate at BlackRock, long-term population growth projections support positive long-term growth in most sectors of the Australian real estate market. Hickey notes that most property sectors in Australia have a history of under-supply and low vacancy rates. Consequently, any investment strategy in Australia should consider whether rental growth can exceed inflation, the existing supply-demand gap, and a favourable exit strategy. In light of this, BlackRock has been targeting niche asset classes in Australia, including childcare properties, last-mile logistics assets, life science real estate, and self-storage properties.
Read also: Weave Living and Blackrock form JV to acquire Citadines Mount Sophia for $148 mil
Hickey explains that these four asset types stand to benefit from Australia’s long-term population growth and are chronically undersupplied compared to the broader regional markets. He also mentions that investing in these assets can lead to above-average returns while mitigating risk, as it is not reliant on a favourable interest rate outlook for generating real estate returns.