How the coronavirus pandemic pushed property investors to look beyond grade A office space

Name: Japanese capsule hotels turned into office units to revive businesses knocked out by Covid-19
Uploaded: 2021-01-18T14:00:11.000Z
Duration: 2 min 7 s
Description: Japanese capsule hotels turned into office units to revive businesses knocked out by Covid-19

While the pandemic has increased demand for core assets – low-risk, low-return properties in liquid markets – the scope of ‘core’ is broadening to include new asset categories, such as logistics, multifamily housing and data centres

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A man sitting on a rooftop checks his phone, flanked by the Tokyo skyline on June 8, 2020. A recently released survey found Tokyo was investors’ third top investment destination in the Asia-Pacific. Photo: AFP

Nicholas Spiro

Published: 10:00pm, 18 Jan 2021Updated: 11:35pm, 18 Jan 2021

For an indication of the degree to which institutional investors remain bullish on the prospects for Asia’s real estate markets despite the damage wrought by Covid-19, look no further than the findings of a survey published on January 13 by the Asian Association for Investors in Non-Listed Real Estate Vehicles and its European and US counterparts.

The poll, which is carried out annually, revealed that 72 per cent of respondents planned to raise their allocations to Asian property in the next two years, compared with 57 per cent and 51 per cent for Europe and the US respectively. Indeed, global investors expect to have a higher exposure to Asia than Asian investors themselves.

However, the survey also found that the pandemic had made investors more cautious. Respondents favoured core investments – low-risk, low-return properties in liquid markets, notably those with long-term leases to creditworthy tenants and grade A office buildings in prime locations – over value-add or opportunistic ones, which generate higher returns but require repositioning or ground-up development to realise their potential.

This is why Sydney, Melbourne and Tokyo – which are among the most established and transparent real estate markets in Asia – were respondents’ top investment destinations, and why the widely traded office sector was their preferred asset class.

02:07

Japanese capsule hotels turned into office units to revive businesses knocked out by Covid-19

The results of the survey also underscored the undimmed appetite for Asian property. While investment volumes across the region were down 28 per cent year-on-year in the first three quarters of last year, the share of cross-border transactions even rose in Japan and Australia, data from JLL shows.

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