Investors are favouring student housing, co-living and serviced apartments among top assets in the emerging living sector in Asia-Pacific as growth in traditional areas like offices and logistics wanes, according to property consultancy CBRE.
These assets remained underinvested in the region and have the potential to deliver better returns as investors look to hedge against inflation, it said. Rising demand from expatriates and low home ownership levels are also aiding the market fundamentals, it said in a report.
Multi-family properties, a subset in the living sector, has become the most preferred asset class this year, displacing previous investor favourites like industrial and logistics assets and the office sector. Global funds are also considering student accommodation in Hong Kong and Australia as possible targets, it added.
The outlook for the market has brightened as global central banks prepare to cut borrowing costs, with the Federal Reserve odds-on to trim its target rate by at least 25 basis points on September 18. The Hong Kong Monetary follows the Fed decision in lockstep under its linked exchange rate system.
The emerging living sector in the region only accounted for 6 per cent of commercial real estate investment volumes since 2019, compared with 27 per cent in Europe and 44 per cent in the US, according to CBRE. This underlines the “vast opportunity for investors” to diversify their holdings, the firm added.
A surge in rental housing rates has outpaced inflation in some economies in the region, making these assets an effective value hedge over the long run, it added. The shorter lease tenures in rental housing also allow for more frequent rent adjustments, CBRE noted.
Japan leads the region’s investments in the living sector, with its multifamily sector being the most developed market compared with Australia and mainland China. For example, this sector offers up to 55 basis points of yield advantage over office assets in Tokyo, said Ada Choi, head of research for Asia-Pacific.
Higher rentals, stoked by an influx of foreigners and expatriates, make the living sector in Hong Kong, South Korea and Singapore a good bet. A significant portion of investment also flows into co-living subtypes like student housing, serviced apartments and senior housing.
