A value-add approach to Asian real estate investment is viewed as significantly more achievable than core, according to REIW delegates.
A survey of attendees of the Real Estate Investment World (REIW) annual event, held in Singapore this week, found that 81% preferred a value-add institutional investment strategy.
The poll was carried out during a core vs non-core discussion chaired by Baker & McKenzie partner Graeme Dickson.
A second poll found that returns of between 6% and 8% were regarded as achievable in the Asia Pacific, Australia and New Zealand.
Stating the case for investment in non-core, BlackRock Real Estate managing director Greg Lapham told delegates investing in core assets in Asia鈥檚 main markets was hard for investors to find returns, given that yields had fallen to as low as 2.75% in Japan and Hong Kong.
鈥淭here have been huge flows into real assets due to low returns in fixed income,鈥� Lapham said. 鈥淭hat鈥檚 one of the reasons Japan has become so expensive.鈥�
The fact core assets have been held on to by local developers and REITs has also played its part, REIW delegates heard, with investors finding it hard to access markets.
Co-panellist Elysia Tse, head of Asia Pacific real estate research at JP Morgan Asset Management, said investors without core assets in their portfolios were 鈥渕issing out鈥�.
鈥淐ore gives you stability,鈥� she said. 鈥淲hen interest rates could rise, there鈥檚 an argument for having core in your portfolio as an anchor.鈥�
Palmer Capital managing director Simon Tyrell said a 鈥渉uge weight鈥� of capital was chasing assets in Asia alongside a lack of opportunities.
Sectors such as self-storage, data centres and education-related real estate investment are an option, he said, for investors looking to benefit from Asia鈥檚 changing demographics.
Speaking earlier in the day, Fraser Thompson, director of AlphaBeta at McKinsey & Co, said demographic change in Asia could result in some countries becoming 鈥渕ore liberal鈥� in their approach to immigration as a result of the need for skilled labour.
Thompson said there was a danger investors would underestimate the demographic risk to Asia鈥檚 real estate markets, pointing to ageing populations and consumer spending.
Erle Spratt, fund manager at Real Estate, said Asia鈥檚 office markets presented 鈥渢he risk of being over-priced鈥�.
Investing in China, he said, 鈥渞emains a challenge鈥�.
