Retail property investments forecast to rise
Print Edition
RETAIL property investment markets in Asia are set to remain strong in 2014, exceeding the already “prolific activity” witnessed in 2013, global property adviser Jones Lang LaSalle concluded in its latest report, “The Asia Retail Investment Outlook and Review.”
The first annual review of the retail real estate investment market in Asia Pacific (excluding Australasia) highlights the likely imbalance of demand and supply for the rest of the year as more capital is channeled to the region and is met with the limited availability of properties.
The outlook comes as retail investment markets in Asia witnessed another strong year of activity from some of the world’s largest investors. Total turnover increased by US$6.16 billion year on year to US$21.17 billion in 2013. While the amount of domestic and international capital designated for retail real estate investments in the region is expected to grow this year, the shortage of stock will keep prices high and force investors up the risk curve and into emerging economies.
“We’re seeing global markets start to recover from the global financial crisis and show more stabilized growth. This, in turn, will help emerging markets from a retail real estate perspective, rewarding pioneering investors with first mover advantage in terms of asset quality and levels of return,” said David Raven, lead director, retail investment, Asia Pacific Capital Markets at Jones Lang LaSalle. “We anticipate the depth and variety of investor interest in these markets to grow throughout the rest of the year, but the real key to success will depend on their ability to understand the dynamics of local markets and to effectively manage their assets.”
One way in which investors are likely to navigate local market nuances is through strategic partnerships. Such partnerships will likely increase this year as investors look for operational expertise and local operators seek financial backing.
Two types of strategic partnerships are anticipated this year, Jones Lang LaSalle predicted. The first sees savvy owners partnering with operational experts such as retail asset managers in order to maximize the performance of their assets. The second will occur in larger, more mature markets where existing owners can entice a relatively passive capital partner with the promise of access to core stock.
While interest in emerging markets will play a role in Asia’s retail landscape this year, transaction volumes are set to remain driven by Japan and China, where investor interest remains strong from both domestic and international players.
There is an expectation that Chinese investors will increasingly take a forensic approach to how they assess individual assets. Their competitive position and factors influencing this include the retail market maturing, land value appreciation arguably slowing in certain locations and the vast development pipeline being delivered.
Domestic Chinese investors are anticipated to remain strong buyers as the amount of domestic capital for investment grows. International capital is also expected to be focused on China, but it is likely to target first-tier cities to avoid becoming exposed in remote and less transparent locations, where prices remain relatively high on a comparative basis.
“As the global economy finally appears to be gaining momentum and shaking off the effects of the global financial crisis, there will be both challenges and opportunities for investors looking at retail real estate in Asia,” concluded Raven. “However, as we look forward to the rest of the year with a positive forecast, the sector continues to offer a strong opportunity for strategic sellers.”
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