Global real estate values increased roughly 6% over the last year, driven primarily by the 11% aggregate rise in values in the Asia-Pacific region.
"Why is APAC important now? It's because it's where growth is," Yi-Shan Huang, former managing director and head of acquisitions at J.P. Morgan Asset Management, said this week at Carmo Cos.' Real Estate Emerging Markets Meeting in New York. "Everyone is chasing growth and yield."
While the European markets de-lever, Asia-Pacific markets — representing roughly 40% of the investable global real estate market — are growing and taking on more leverage. Gross domestic product across the region is growing at about 4.5% per year.
International investors, especially those new to the region, continue to focus on Australia and Japan, in addition to Hong Kong and Singapore, the most developed of the individual Asia-Pacific markets that are "much easier" to understand on a relative basis, according to Tim Morris, founder and partner at Proprium Capital Partners.
But investors are warming to new areas of interest, particularly India, whose population of about 1.33 billion is roughly equivalent to China's but whose institutional-grade commercial property market is still in its early stages of maturation. India's first REIT, Embassy Office Parks REIT — a Blackstone Group Inc.-backed, Bangalore-based developer — went public earlier in 2019.
Ted Willcocks, global head of real estate asset management at Manulife Asset Management, said India's burgeoning real estate investment trust market will bring transparency to what has been an opaque market, transforming it over a few short years as the advent of so-called J-REITs did to the Japanese commercial market.
"I think you're going to find the REIT industry is going to start to draw a lot more capital to India very quickly," Willcocks said.
Proprium Capital's Morris said investors generally think of India as a relatively safe market, from a legal and political perspective, though in reality, its "democracy run amok" dynamic may result in long wait times in the court system.
"There's a bit of false comfort," he said. "But I do think people feel a little bit more comfortable in India — that they're not going to get screwed by the government."
Morris described demand overall for commercial property in India as "off the charts," and the competition in the market as relatively sparse, given the dearth of domestic capital players there.
"It's really just a matter of the institutional capital forming ... to make the longer-term investment into that institutional product once it's created," he said.
