Within Asia Pacific, Japan is one of the most preferred markets for real estate funds, according to a KPMG report, though the broader region remains under-allocated.
Japan is «by far» a preferred market in APAC for institutional investors of private real estate funds, according to a report co-authored by KPMG, law firm Goodwin and IQ-EQ Fund Services.
«With its ultra-low interest rates, the Japanese market was, for many, the Asian market in which they can still underwrite an investment on a conventional basis,» said the report, which is based on a survey of industry professionals.
«The yen’s current weakness also offered a foreign exchange upside for overseas investors. Japan was one of the few markets in which offices and, to a lesser degree, the retail sector attracted positive comments and is the only APAC market that can point to a well-developed multi-family residential (MFR) sector.»
Australia, Korea, India
Interest in Australia’s residential market was also strong with «build-to-rent» being the most widely discussed strategy. Living sub-sectors such as student accommodation and senior living in the country were also deemed «most culturally suited» in APAC.
Respondents also conveyed «overwhelmingly strong long-term sentiment for Korea as a whole» with foreign investors in the market anticipating a heavy focus on industrial sectors. Some also find healthcare and offices attractive.
And in the midst of disruption in other growth markets, India is expected to be the «main beneficiary» due to its ability to provide «scalable emerging market exposure». As a result, there has been a «clear uptick in appetite» for Indian assets, particularly in the industrial sector.
Nonetheless, APAC overall was the most under-allocated region globally, according to the majority of limited partners and general partners surveyed.
«This is attributed primarily to the resilience of developed markets in APAC. There was a perception amongst Asia-based real estate professionals that re-pricing of assets will occur sooner in Europe and North America than in APAC and that more capital would flow to those re-priced markets,» the report explained.
In terms of sub-asset classes, private credit attracted an «all-time high level of interest» in the midst of rising interest rates and more conservative lending from traditional financial institutions. Within the region, more focus will likely be placed on Australia due to its superior market maturity.
«There has been a lot of global interest in fund secondary transactions in the year to date, but these do not appear to have gained the same level of traction in APAC real estate compared to other global markets,» the report added. «As and when there is more re-pricing in the region, we can expect secondary transaction volumes to increase.»
The report was based on a survey of more than 40 senior professionals in the region’s private equity real estate industry.