Real Estate Investment
Unlike most traditional investments, real estate assets are tangible. They are office buildings, shopping malls, warehouses, multifamily projects and other property types. As tangible assets, they require highly specialized skill sets, broad platform capabilities, dedicated professionals and sheer manpower for maximizing return on investment.
Asia Pacific Region (APAC) real estate strategies seek diversification and growth by investing in both core and opportunistic real estate assets throughout Asia Pacific.
DID YOU KNOW?
APAC tenants are large, stable enterprises, with strong credit ratings. More Fortune Global 500 companies make their headquarters in APAC than in either the U.S. or Europe.
Asia Pacific is currently the world’s largest real estate market, representing over 35% of the worlds’ invested real estate stock.
Tokyo’s total office stock alone is nearly twice that of New York’s.
Forecasts suggest Asia Pacific GDP growth will be double that of the U.S. and developed countries in Europe.
Corporate and private client investors have long realised a bias in portfolios toward their home markets can be detrimental in times of economic crisis and market stress. Many compensate by seeking diversification in markets overseas. In public equity, for instance, private client investors allocate approximately 55% of their assets to international markets. However, many of these same investors maintain a persistent domestic market bias in real estate portfolios, with approximately 15% of real estate allocations invested internationally.
A broad geographic exposure in real estate, not only offers growth similar to equities and yield opportunities like those in fixed income, but the potential for additional diversification as well. This is especially true for the APAC, which can diversify an investor’s entire portfolio horizontally across asset classes, and vertically within real estate sectors and geographies. For institutional portfolios with real estate allocations currently dedicated to the U.S. or Europe, the broad opportunity in APAC real estate can add diversification and deliver enhanced risk-adjusted results.
The APAC region offers opportunities across the risk-return spectrum:
The APAC region presents broad opportunities for core real estate, in the key countries of Australia, New Zealand, Japan, Hong Kong, Singapore, Taiwan, South Korea, Thailand and Tier 1 cities in China. APAC is the world’s largest real estate region overall, and includes the largest core real estate markets as measured by invested stock. APAC core real estate offers scale, stability, liquidity and transparency on par with the core markets of the U.S. and Western Europe.
The region also offers access to a leading world growth story with two secular trends that should persist well into the future: rapid urbanization and a growing middle class. These trends should support opportunistic real estate investment within the region. In fact, APACs’ aggregate GDP is forecast to grow more rapidly than that of the advanced economies.
Real estate investing may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographical sector. Real estate investing may be subject to risks including, but not limited to, declines in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrower.
Real Estate Securities Risk. The value of real estate securities in general, and REITs in particular, are subject to the same risks as direct investments in real estate and mortgages, and their value will depend on the value of the underlying properties or the underlying loans or interests. The underlying loans may be subject to the risks of default or of prepayments that occur earlier or later than expected and such loans may also include so-called “subprime” mortgages. The value of these securities will rise and fall in response to many factors, including economic conditions, the demand for rental property, interest rates and, with respect to REITs, the management skill and creditworthiness of the issuer. In particular, the value of these securities may decline when interest rates rise and will also be affected by the real estate market and by the management of the underlying properties. REITs may be more volatile and/or more illiquid than other types of equity securities.