JLL reveals in a new report a potential increase in annual investment volume in multifamily residential in Asia Pacific. Expectedly, as the JLL report suggests, it will double in size by 2030. Investments may potentially cross $20 billion as the decade nears an end.
Multiple factors can potentially make multifamily residential transition from a peripheral to a major asset class in the wake of the following decade. However, there are multiple reasons behind that. A few good reasons for the same would be urbanization, stretched housing affordability, and a high renter population.
The multifamily investment has outperformed in Asia Pacific in the first three quarters of 2023. Investment reached $5 billion in the first nine months during the first nine months of 2023. This marks a 12% year-on-year increase despite a 24% decline in total real estate investment volumes in the area in the same period.
Japan led the increase in multifamily transaction activity; it is the most well-established market in the region. This is followed by the Multifamily residential of China and Australia build-to-rent (BTR) markets developing in recent years.
“Investor interest in core multifamily assets has never been stronger. It’s a rapidly evolving market and with more investable products coming into the pipeline, wider participation from institutional investors in the sector and strong fundamentals, we expect demand for core multifamily product in APAC to outgrow investible stock,”
according to Robert Anderson, Director – Head of Living, Asia Pacific Capital Markets.
The core m multifamily universe will keep expanding over the following decade, with investors targeting vast metropolitan areas Such as Osaka, Tokyo, and Nagoya. However, as few of the capital sources capable of bidding on large portfolios have neared their targeted allocation for multifamily, deal activity is expected to be most prevalent for smaller quantum portfolios or for single assets in the upcoming quarters.
The momentum behind the growth of the Build-to-Rent (BTR) sector in Australia is gaining strength due to a housing crisis caused by an increase in migration after the pandemic. In contrast, China’s multifamily housing market is relatively new but holds great potential, as investors are becoming more active in the Shanghai multifamily market, driving sector deal activity to record levels. Over the next seven years, Shanghai is projected to become a leading investment destination, benefiting from its scalability and increasing investment opportunities.
The rising number of young to middle-aged individuals flocking to major cities, along with an aging population, is responsible for the upward trajectory of the region’s rental residential market. With Asia Pacific’s primary multifamily markets continuing to attract significant new capital, this is expected to result in further yield compression in the future, albeit at a slower pace compared to the previous decade.
“Conversion strategies are likely to be a prominent trend in the Asia Pacific housing sector, as there is a disconnect between the supply and demand for rental housing, especially in urban and core locations,”
comments Pamela Ambler, Head of Investor Intelligence for Asia Pacific at JLL. Consequently,
“we anticipate an increased deployment of capital to transform underperforming properties into managed living projects to take advantage of this supply-demand imbalance.”
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