Investors To Eye Alternative Real Estate Sector, Says Report
While alternative segment will gain ground, impact of technology will be felt across the landscape. The momentum of blockbuster real estate deals that hit the headlines in 2017 is likely to see an upward movement in 2018, both in Asia Pacific and India, according to a JLL research.
It is expected that Asia Pacific transaction volumes will grow five per cent to reach $135 to $140 billion in 2018, driven by continued momentum in core markets and increased interest in developing markets.
India, a key market in the region, will benefit from reforms such as demonetisation, the implementation of Real Estate (Regulation and Development) Act, 2016, and the Goods and Services Tax (GST). Policy changes in the year have made the market more transparent. Going forward, technology disruptions and the alternative real estate segment will attract more investments into the market.
Ramesh Nair, CEO & Country Head, JLL India said, "India's Tier 1 office and retail sectors are projected to show the highest total returns in 2018. We've seen the end of the short-term disruption in India resulting from reforms such as demonetisation and the implementation of Goods & Services Tax. 2018 may be the year for investors to consider a strategic entry into India, given its positive long-term fundamentals and economic growth."
Region Investor Investee Deal amount Li Ka-Shing's Hong Kong China Energy Reserve CK Asset and Chemicals Group, Holdings in HNI The Centre $5.2 billion Australia Accor Hotels Group Mantra Group Limited $1.2 billion India GIC DLF Cyber City $1.4 billion Allianz Group Shapoorji Pallonji Group worth $500 million
Investors will seek opportunities in the alternative real estate sector such as aged care/senior housing, student housing, education, data centres, and self-storage facilities, to diversify their portfolios, and for long-term growth.
"We're observing growing interest and a huge opportunity for alternative real estate. Demand in these sectors clearly outweighs supply, and the demographic demand drivers in the region are growing quickly. Yields on self-storage facilities are attractive compared to other traditional asset classes, ranging from five to seven per cent in Tokyo and Singapore, five to eight per cent for Australia, and around eight per cent in China and India," said Nair.
Technology will increasingly impact the way real estate is used. Proptech - the convergence of property and technology - is the latest disruptor in real estate and is likely to pick up steam in 2018. According to JLL research, India has reported 77 deals amounting to $928 million in property technology space since 2013, the maximum by any country in Asia Pacific region.
Against this, Asia Pacific proptech startups have already received 60 per cent ($4.8 billion) of the $7.8 billion raised by global proptech start-ups from 2013 to 2017. Rapid urbanisation, presence of a large section of middle income population, upscaling of technology, and presence of a strong secondary and rental market along with over-served primary market has led to the growth of proptech in the country.
Specifically, start-ups in brokerage and leasing have received nearly 90 per cent of total Asia Pacific proptech funding since 2012. However, in coming years, proptech space will have more to offer in India with the regulation and rising transparency. In the long-term, digitisation of services, Internet of Things (IoT) adoption and automation will have a significant impact on corporate real estate strategy, team structures and processes. The introduction of IoT - smart systems and devices operating over a network - will drive greater transparency of real estate portfolio utilisation and performance. Smart buildings will help both building owners and occupiers improve performance and save costs. Companies will design cool offices in the war for talent.
While managing costs remains a priority for most businesses, so is access to talent. With organisations using the workplace to boost employee engagement and attract and retain talent, there will be a continued rise in companies using co-working spaces in 2018. Those that offer high-tech, personalised and innovative space offerings - such as collaborative workspaces, food and beverage, gyms and wellness areas - that create a human-centric experience will stand out and attract the best in the war for talent.
"The shift to creating a holistic user experience is beginning to transform office space. The workspace of the future is one that can meet employee needs, while driving effectiveness and engagement levels," said Nair.
With inputs from Housing News