In a chaotic year for, well, everything, real estate investment in Asia Pacific suffered, but it did not suffer as badly as in other regions. Furthermore, investors from inside and outside the region are increasingly turning their attention to the region’s real estate.

At the heart of the region’s rising popularity is its success in dealing with the COVID-19 pandemic. This is true across the region; India’s numbers may look dramatic, but its COVID-19 death rate is not even in the global top 100. The response from nations in the region has varied dramatically, however most closed their borders to visitors and introduced quarantine for returning citizens. The success may not even be due to policy: scientists at India’s National Institute of Biomedical Genomics have suggested deficiency of a particular lung-protecting protein may have made European and North American populations more vulnerable.

Whether it is policy, luck or both, Asia Pacific economies began to recover first and this has boosted confidence in the region. Data from Real Capital Analytics show the bounce back started in the final quarter of last year: while Q4 transactions volumes were down 10% on 2019, this compares with an overall drop of 23% year on year, suggesting a sharp recovery. Some markets, including Hong Kong (168%) and India (352%), saw dramatic rises in the final quarter of 2020.

The industrial and logistics sector, including data centres, is attracting the most capital, as might be expected due to the boosting effect of the pandemic. Interest in multifamily residential, historically one of the most resilient real estate sectors, is at record levels. Office and retail assets ought not to be disregarded. Asian workers are heading back to the office in great numbers and the shopping centre’s place in our busy cities is changing due to the impact of e-commerce, but not declining.

As vaccination programmes ramp up around Asia Pacific, the recovery will strengthen further and once travel is restored, perhaps in the form of corridors between secure nations, real estate investors will jump at the chance to kick the tyres and see opportunities up close.

At the same time, we are seeing more interest from investors outside of the region. Real estate investors and asset managers are expanding their teams in Asia Pacific and launching new funds. Low yields from other asset classes mean there is a huge amount of capital allocated to real estate, with more than $300 billion of dry powder in private equity funds, Preqin data show. A relatively small amount, just over $40 billion, is targeting this region, however, Asia looks like a more and more attractive home for capital relative to the rest of the world. Capital allocated to global strategies could easily find its way here.

And we shouldn’t forget that all the long-term structural reasons for investing in Asia Pacific real estate – such as urbanisation, a growing middle class and digitalisation – did not dissipate in 2020. The Brookings Institute estimates Asia’s middle class will grow to 3.5 billion in 2030, from 2 billion today.

That is a lot more homebuyers, shoppers and office workers in need of real estate.

Further reading:
Asia Pacific Investment Quarterly

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Simon Smith