Connect with us
Load WordPress Sites in as fast as 37ms!

Property

Commercial real estate investment shows Value-add on the rise in Asia Pacific

Avatar

Published

on

For FY 2018, direct commercial real estate investment volume for Asia Pacific totalled USD 160 billion, increasing from FY 2017’s figure of USD 149 billion.

Out of this growing allocation of capital to real estate, a clear preference for value-add investment strategies has emerged.

Figure 1 shows that core, core-plus and opportunistic strategies have remained relatively unchanged in terms of their dry powder over the six years ending December 2018. 

Core and core-plus are characterised by lower risk and lower returns; generally Grade A office buildings in core locations of major cities, with diversified tenant mixes and stable occupancy rates.

Opportunistic, on the other hand, is higher risk and higher return, focusing on buildings that generally require significant enhancement or redevelopment.

Figure 1: Changes in dry powder by strategy
Source: Preqin, JLL

Value-add, however, characterised by medium-to-high risk in tandem with medium-to-high return, has been winning the popularity contest over the same period. Typical value-add categorisations would involve the purchase of an asset which is encountering operational issues or could benefit from refurbishment, then modifying and effectively repositioning and stabilising the property, before selling it at a favourable point in time with a higher valuation (usually holding for 4-10 years) to maximise return.

Lack of availability of core product

With a lack of availability of core product, investors are finding it increasingly difficult to deploy capital to core assets in central locations and are looking to source suitable product in more fringe locations.

In addition, existing owners of core assets are more reluctant to sell in the current market as re-entry and securing new assets is becoming increasingly challenging.  These factors contribute to the increased interest from investors in value-add investments.

Yield compression

As capital value growth has outpaced rental growth in most Asia Pacific markets during the course of this cycle, core yields have compressed which may be another reason for investors moving up the risk curve to chase higher returns, in order to deliver their required returns. In tandem with the late cycle stage, investors may opt to take on more risk as “underpriced” assets are generally much harder to find.

Enhancing the value add

Proptech has broadened the scope for office building enhancement through changing the way real estate is managed and occupied. Integration of new technologies is helping to address occupier demands and transforming the human experience by optimising utilisation of space, employee productivity and wellbeing.

Sustainable refurbishment and associated building accreditations, such as LEED or WELL, provide further tangible proof of added value. These factors can boost rental income through increased occupancy and improved rental levels via improved tenant quality. Furthermore, certifications such as these tend to reduce occupancy costs and increase asset value…

Source link

0/5 (0 Reviews)
Advertisement Load WordPress Sites in as fast as 37ms!
Comments

Banking

Government Housing Bank (GH Bank) extends low-cost housing project

The Government Housing Bank (GH Bank) has launched the one-million-unit low-cost housing project, which provides an opportunity for the general public to buy houses priced below one million baht.

National News Bureau of Thailand

Published

on

Real Estate promotion billboards in downtown Bangkok

BANGKOK, 24 May 2019 (NNT) – The government has a policy to improve the people’s quality of life by providing affordable housing to low- and middle-income earners.

(more…)
0/5 (0 Reviews)
Continue Reading

Property

Drivers of Asia Pacific office space demand in 2019 remain strong

More employers plan to increase rather than decrease staffing levels in most Asia Pacific countries, with employers in Japan reporting the strongest hiring intentions.

Avatar

Published

on

Office occupational demand was robust across Asia Pacific in 2018, with overall leasing activity up an impressive 20% for the whole year.

(more…)
0/5 (0 Reviews)
Continue Reading

Property

Property slowdown looms over Thai market

The Thai cabinet has approved last week cutting both housing transfer and mortgage fees to 0.01% for 12 months

Olivier Languepin

Published

on

Some developing economies from Thailand to Dubai and Brazil are facing double-digit real estate sales declines on the back of weakening domestic growth, says Bloomberg.

(more…)
4.3/5 (3 Reviews)
Continue Reading

Most Read

Must Read

Trending