Data centres and logistics properties are likely to attract greater asset allocation from investors in the Asia-Pacific region this year, after the Covid-19 pandemic forced lifestyle changes in work and consumption nearer home, property analysts said.
Faster adoption of e-commerce has boosted the appeal of logistics properties as supply deficit grows, especially in markets with large populations such as Australia, Japan and South Korea, according to M&G Real Estate in Asia, part of UK-based group with about £271 billion (US$371 billion) of assets globally.
“Working remote will be much more acceptable and people will start doing that,” said Richard van den Berg, a Singapore-based fund manager at M&G. “What we can see is that central business districts (CBDs), centre locations, for core strategies will remain important … while high quality, suburban locations in residential areas will see some growth there as well.”
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Offices, logistics and industrial assets as well as data centres were the top three asset classes to invest in 2021, according to a report by real estate consultancy Colliers International, based on a survey of 74 investors in 18 cities in Asia-Pacific in late last year. Appetite for data centres was aided by the growth of e-commerce, especially in Shenzhen, Seoul and Tokyo, where the network infrastructure is mature, the report showed.
Underscoring that trend, Mapletree Investments earlier this month won an auction for an industrial site in New Territories for HK$812.9 million (US$104.9 million), which at HK$3,750 per sq ft is a record high for the market segment in northern New Territories. The site could be used as a data-centre facility. China Mobile, the world’s biggest telecoms group by subscribers, offered HK$5.6 billion for a site in Sha Tin in July.
More hybrid properties with retail and logistical functions can be expected to come to the market over the next 10 years as e-commerce becomes more entrenched, van den Berg said. Growing e-commerce during the pandemic had elevated consideration for environmental, social and governance (ESG) issues in investment strategies, he added.
In the retail segment, lockdown fatigue has caused consumers to shop and dine at malls located in suburban areas, said Jonathan Hsu, head of research at M&G Real Estate, citing Singapore as an example. As such, physical retail stores should not be overlooked despite the online shift, he said.
“Online shopping percentages dropped substantially as soon as we were allowed to go outside shopping again,” he said. “I think it goes to show that it’s not the end of bricks-and-mortar retail.”
While property investment trends in the Asia-Pacific revolved around tech-linked properties that facilitate the lifestyle shifts, Hong Kong’s strength remains in the financial sector by facilitating capital flows in and out of mainland China, analysts said, as well as a venue to raise funds for technology companies in Shenzhen.
While short-term down cycle from the pandemic and street protests had affected investments towards the city, Hong Kong’s status as a financial hub would remain intact, according to M&G. While other cities in the region may take over part of Hong Kong’s historical role as a leading international financial centre, the growth of China will compensate for that, said van den Berg.
“Hong Kong has a great long-term future, and clearly that long-term future is going to be intertwined much more with China than historically it was,” he added.
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