Emerging markets come on the radar as investors look for alternatives
Tokyo, June 13, 2017 – Limited investment opportunities due to a shortage of investment-grade assets in the safe haven core markets of Asia Pacific have prompted investors to turn their attention to secondary and tertiary markets and even to non-core property types. In its latest research report, “Betting on Asia Pacific’s Next Core Cities”, Cushman & Wakefield selected the next core and emerging markets in the region that will remain relevant and dominant over the next five to ten years.
Sigrid Zialcita, Managing Director, Asia Pacific Research at Cushman & Wakefield says, “Asia Pacific remains a very viable investment target for global capital. However, against a backdrop of limited availability of core properties, abundance of capital and spiraling property prices, we are seeing more buyers and sellers of real estate recalibrating their investment strategies and seeking out alternative investment targets. Using our proprietary tool, Strategic Location Indicator (SLI) , we have analyzed the core and emerging markets in Asia Pacific and identified the areas that will offer investors the opportunity to tap into their long-term growth fundamentals, which will become increasingly viable due to sustained reforms and economic initiatives.”
Asia Pacific’s Next Core Cities
Core Markets in Tokyo
Hideaki Suzuki, PhD, Research Director, Japan at Cushman & Wakefield says, “Since market pricing for real estate investments has become aggressive, investors are being forced to adjust their risk tolerance when asset hunting. That said, adjusting risk tolerance is not the same as unnecessarily taking risk and blaming real estate when things don’t work out. Investors should consider to invest in “Next Core Markets” instead.”
He further commented, “The Shinagawa area is one such area that has the potential to become a next core market. New connections being planned will serve to cement the ward as a major transportation hub, from which Shinagawa will receive substantial benefits. This new demand should serve to improve asset prices and elevate the surrounding areas into the “core” space. Ikebukuro is another submarket that we believe has the potential to elevate to core status: Ikebukuro station sees approximately 2.6 million daily passengers, making it Tokyo’s third busiest. As a direct result of the number of passengers, Ikebukuro occupies a spot in the top ten retail markets across Japan, in terms of rent. Planned re-developments are expected to enhance the attractiveness of the area, while the area still offers comparatively attractive investment yields. Investing in these next core markets will enable investors to avoid uncertainty and facilitates the adoption of more intelligent investment strategies.”
What’s ahead for the rest of 2017?
“Investment activity in Asia Pacific has been robust in 2017. As noted in our annual The Atlas Summary 2017 report, real estate investment volume in Asia Pacific is expected to hit USD611 billion this year. Data from Real Capital Analytics (RCA) indicate a total investment value of close to USD136 billion in the region in the first quarter of this year, which is a record quarter high. Pending any unforeseen circumstances in the months ahead, we expect this positive momentum to continue and 2017 to be a banner year for real estate investments in Asia Pacific,” noted Ms. Zialcita.
For 2017 and beyond, five important themes will continue to influence the investment landscape in the region.
1. Real Estate Going Public – Government efforts to implement pro-investor legislation in many emerging countries will improve transparency and efficiency, which will widen the investor base. While Tokyo and Singapore continue to be the region’s hubs for Real Estate Investment Trusts (REITs), the next wave will be propelled by the region’s emerging markets, in particular China and India.
2. Policy Trumps Politics – While the uncertain global political arena and protectionist trade policies continue to take center stage, they are not likely to pose a high risk to Asia Pacific’s regional outlook. The increasing focus on stability and growth in the region is a prominent factor to attract investment dollars.
3. Asia’s Great Wall of Capital – The abundance of Chinese capital and the growing numbers of active investors have driven strong capital flows in the region and this is unlikely to change over the long term.
4. Follow the Infrastructure – Growth in investments and improvements in infrastructure in many markets across Asia Pacific are helping to stimulate the region’s potential, particularly in the emerging markets.
5. Alternative Assets are Hot – Data centers remain lucrative as online shopping becomes the norm and data needs for cloud-based systems rise. Student housing, retirement living and healthcare are also gaining prominence as popular alternative property investment types.
The full report is available on the report site.
For further information, please contact:
Hideaki Suzuki, PhD
Director, Research, Japan
+81 3 3596 7804
Head of Communications, Japan
+81 3 3596 7045