Connect with us

Property

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

Daniel Lorenzzo

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

Comments

Property

Why air is becoming a hot investment

As rapid urbanisation takes hold, and the amount of available space shrinks, more cities are waking up to the value of their air.

Daniel Lorenzzo

Published

on

The questions of who owns the air above buildings has long been a hotly contested issue in metropolises like London, New York and Hong Kong.

(more…)

Continue Reading

Property

Record low sales rate hits Bangkok condo market

Bangkok hit a decade-long record for new condos entering the market, with 65,000 new units launched throughout 2018, but the sales rate fell to a 15.7% record low.

Olivier Languepin

Published

on

The sales rate for new condos launched in Bangkok in the second quarter fell to 15.7 %, an all-time low, beating the lowest previous quarter (35%) in 2010 when the “red shirt” political crisis brought Bangkok to a standstill.

(more…)

Continue Reading

Property

What’s top of mind for corporate real estate in 2019?

Flex isn’t just co-working, and it’s evolving rapidly. Companies both large and small are increasingly implementing new space concepts and flex models whilst also reimagining their existing workplace to be more agile and dynamic.

Daniel Lorenzzo

Published

on

Increasing alignment of corporate real estate’s (CRE) strategic goals with broader enterprise priorities is a key insight emerging from JLL’s top 10 CRE trends for 2019. 

(more…)

Continue Reading

Cart

Most Viewed

Events Calendar

« September 2020 » loading...
M T W T F S S
31
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
2
3
4

Subscribe via Email

Enter your email address to subscribe and receive notifications of new posts by email.

Join 12,883 other subscribers

Latest

Trending