The View | Could Asia’s home rental market be the next big thing for investors?
- The emerging sector of multifamily properties is offering many untapped opportunities – especially in China, where catalysts for the institutionalisation of its rental housing market have coalesced in recent years
Global commercial property investment markets are a hodgepodge of divergent themes and trends, a function of countries’ differing levels of development and maturity. In the United States, the office sector accounted for just 19 per cent of transaction volumes over the past six years, compared with 76 per cent in India and 54 per cent in China, data from JLL shows.
The differences are starker when it comes to multifamily, or build-to-rent (BTR) properties. These are apartments in city centres, purpose-built for the private rental market, that are professionally managed and leased to a variety of tenants.
In the US, the living sector (which also includes student housing and single-family rental homes in suburban areas) has constituted 41 per cent of investment activity since 2018. Even among advanced economies, this is far and away the largest share. In Britain, the proportion is 17 per cent, according to JLL.
In the Asia-Pacific region, the living sector is just beginning to emerge. With the exception of Japan – by far the most mature multifamily market in the region, with the sector comprising 13 per cent of transaction volumes in the past six years – it is in its infancy, accounting for just 1-3 per cent of deals in Australia, India and China.
Yet, the absence of an institutionalised private rental market in most of Asia is part of the attraction for investors. Over the past several years, the push to deploy capital in the sector has increased sharply. Untapped opportunities across the region provide a way for global funds to increase their allocations to multifamily real estate, a resilient asset class providing stable rental income, high occupancy rates and protection against inflation due to shorter leases.
A confluence of factors – structural tailwinds stemming from demographic and lifestyle changes, housing affordability issues, and a deterioration in sentiment towards offices since the pandemic erupted – have led to a significant increase in fundraising and site acquisitions in Asia’s multifamily sector.