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News Release

HO CHI MINH CITY

Alternative real estate sectors luring investors in Asia Pacific

By Rohit Hemnani, COO and Head of Alternatives Capital Markets, Asia Pacific


HO CHI MINH CITY, 19 April 2018 – Investors in Asia Pacific are looking beyond offices and shopping malls for the next big thing.

 

Demand is shifting toward historically less-trodden areas of the property market that offer superior returns, something that has become increasingly important to property investors facing record-low yields around the world.

 

These alternative sectors include properties like data centres, student housing, self-storage, education and senior housing.

 

While investing in these properties can come with hurdles, robust returns and long-term stability are drawing interest across the region.

 

Last year, U.S. private equity firm TPG invested US$140 million in the Vietnam Australia International School, which has campuses in Ho Chi Minh City. Singapore's sovereign wealth fund GIC bought student housing blocks in Sydney from Frasers Property Australia and Sekisui House Australia for A$400 million.

 

"Although Asia Pacific's alternative real estate market is still relatively immature compared to Europe and the United States, interest is growing fast," says Rohit Hemnani, COO and Head of Alternatives, Capital Markets, JLL Asia Pacific.

 

A key driver of the demand: the region's broader fundamentals such as urban growth, the broad adoption of the Internet and an ageing population, where those aged 65 and above are projected to increase by 40,000 people per day over the next 10 years, according to a JLL report on the alternatives sectors.

 

Lure of strong returns

 

Alternatives sectors typically offer stronger returns than more traditional real estate. While the range can vary, estimated yields on alternatives, such as data centers, sit anywhere from five to eight percent in Tokyo, Sydney and Singapore, representing a healthy spread compared to traditional asset classes.

 

Regional demand drivers

 

It's not just returns. Stability is a factor.

 

Operating leases of aged care homes, schools, and data centers often extend over 20 years, providing a stable income stream that lessens the impact of market volatility.

 

Clearly, different countries present different opportunities. Education and student accommodation sectors are well-positioned to grow in Australia, China, India and Southeast Asia, Hemnani at JLL says.

 

The rise in ageing population means that the senior housing market will fare well in Japan and China, he says.

 

Despite the potential, Hemnani highlights that there are high barriers to entry.

 

"Typically, aged care and data centers are highly regulated by governments so managing them in accordance with local laws can be demanding," Hemnani says.

 

"In Asia Pacific, the various alternative sectors sit across different levels of maturity, so understanding market fundamentals and operational capabilities can also pose as a challenge," he says.

 

Click to learn more about real estate investment in Alternatives.

 

 

 

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About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion and fee revenue of $6.7 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.

 

JLL has over 50 years of experience in Asia Pacific, with over 37,000 employees operating in 96 offices in 16 countries across the region. The firm won the 'World's Best' and 'Best in Asia Pacific' International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the sixth consecutive year by Real Capital Analytics.  www.ap.jll.com.