JLL - The Rise of Alternative Real Estate in Asia Pacific (2018)
JLL - The Rise of Alternative Real Estate in Asia Pacific (2018)
The Fundamentals
2 The Rise of Alternative Real Estate in Asia Pacific
A brief introduction
Investors in the Asia Pacific While there may be some Despite the growing investor
region continue to seek cyclical trends to the demand across the region,
out new markets and new increased investor demand, there remains a large
sectors in order to obtain there are real longer-term disconnect between capital
asset diversification and secular and structural trends and expertise which has
enhanced risk adjusted at play in the background opened up an opportunity
returns. One of the key that are underpinning for first movers across a
means by which investors longer-term prospects for number of markets and
are going about this is a many alternative sectors. sectors.
rapid shift towards the
Alternatives sectors1.
1. Alternatives sectors refer to non-core asset classes, including education, student housing, aged care, self storage, data centers and renewables.
3
Almost all of the Alternatives sectors, including Below we have highlighted five key demand
data centers, self storage, aged care and so drivers of the Alternatives landscape and have
on find their primary demand drivers to be indicated the key sectors that correlate. These
associated with broad based trends such as demand drivers differ to traditional real estate
age demographics, urbanization, technological asset classes.
advancement or macro growth in consumer Most of the factors supporting the Alternatives
markets and household wealth. sub-sectors are broader, longer-term trends
Given the fast changing trends across most with much less volatility and uncertainty
of these demand drivers, the current supply/ surrounding the medium-to-long term outlook.
demand dynamics of most Alternatives asset By comparison, traditional asset class demand
classes are well out of sync and continue to play drivers like white collar employment (office) and
catch-up to the underlying market demand. retail turnover (retail) tend to be more volatile
with much less certainty around the outlook.
Aged Care ✓ ✓ ✓
Student Housing ✓ ✓ ✓ ✓
Education ✓ ✓ ✓ ✓
Data Centers ✓ ✓ ✓ ✓
Self Storage ✓ ✓
Renewables ✓ ✓
4 The Rise of Alternative Real Estate in Asia Pacific
million
million
300
80 30%
million
200 60
200 20%
100 40
10%
20
100
Asia Pacific Rest of World 0 0%
Asia Pacific Europe Africa / ME Americas
Europe US/Canada Americas (excl. US/Canada)
0 Africa Asia Pacific Growth Growth %
Asia Pacific Americas Europe
Furthermore, growth of the urban population in Another key trend is the improvements in Asia Pacific has a much younger average age
Asia Pacific is expected to exceed over 400 million technological advancement and the rapid compared to Europe and the US. However,
people over the next 10 years. By contrast, the adoption of smart phones, cloud computing and growth in the population aged 65 and above is
Americas (both North and South) are expected the internet of things. expected to increase significantly.
to see their urban populations increase by just The general growth of internet user rates in Over the next 10 years the population aged 65
over 100 million, with Europe’s urban population Asia Pacific is forecast to exceed 560 million and above is expected to increase by 146 million
growing by 21 million over the same time additional users over the next 10 years. To put - equivalent to 40,000 people per day. The growth
horizon. In fact, Asia Pacific’s urban population this into perspective, there will be over 150,000 in Asia Pacific will account for more than the rest
growth over the next decade is larger than the new internet users per day, or more than 100 of the world combined.
entire current population of the Eurozone or the new users per minute, every minute for the next
United States. This will have a lasting impact on decade.
the general real estate markets, but particularly
in regards to the Alternatives sectors such as self
storage, data centers and education.
6 The Rise of Alternative Real Estate in Asia Pacific
Why Alternatives?
5% 4%
Alternatives sectors offer a new investment
%
%
4% 3%
thesis that compliments more traditional sector
3%
investment. 2%
2%
1%
The structure of Alternatives real estate is such 1%
15-25%
Propco/Opco
Return Legacy ownership
Market specific
requirement
10-15%
Propco
Sale-leaseback
Build-to-suit
Risk (Specialization)
8 The Rise of Alternative Real Estate in Asia Pacific
Despite the strong investment case behind Introduction Developing Growth Matured
Alternatives, there remain a number of barriers to
entry or hurdles to investment. Some sectors are
highly regulated by governments
(e.g. aged care and data centers) in certain
markets. Furthermore, the sectors and markets AS
sit across a wide spectrum of maturity in Asia
H
Pacific, so understanding market fundamentals
and operational capabilities can be challenging. A
The lack of institutional grade product also J
JS
means market entry is often achieved via
development, and operational capabilities need
to be acquired or grown organically. C
Despite the challenges ahead, there is C
tremendous opportunity for investment in C
Alternatives and to develop platforms in Asia
Pacific, given the demand and demographics in
this region.
I
I
Aged Care Education Student Housing Data Centers Traditional Sectors
• International schools in Asia Pacific are • India has 34 million college students, a third of • Growth in the urban population, ageing
forecast to grow by 3-4 times over the next 15 whom are studying outside their home state. population, and internet users over next 10
years to 15,000 schools, 10 million students, • Tokyo has 1.5 million tertiary students, but no years will be larger in Asia Pacific than rest of
and $113 billion in annual tuition fees. global standard student housing facilities. In world combined.
• IRRs in the Education sector in Asia Pacific contrast, London has a quarter of the number • Japan, Hong Kong and China are the top 3
range from 10-15% at propco level to 35%+ at of students and a significant amount of high most attractive destinations in Asia Pacific for
opco level. specification student housing facilities. self storage.
• Asia Pacific is experiencing a shift in demand • In most Australian cities, there is less than one
from expatriates to local clientele seeking purpose built student accommodation (PBSA)
quality English-medium education at mid- bed for every 10 students.
market pricing..
10
Australia
• The global population aged 65 and above • Investment in data centers opco/ propco yields China
will rise from 962 million in 2017 to 2.1 billion 15-25% levered returns.
by 2050. Asia Pacific represents 62% of this • China’s cloud computing market is forecast to Hong Kong
growth. grow from $1.5 billion in 2013 to $20 billion by
• 53% of the working population in Japan will be 2020 (CAGR: 40%). India
aged 65 and above by 2030. • Singapore and Sydney’s colocation market
market is projected to grow at a CAGR of Japan
12-15% over the next 5 years.
Singapore
Shashank Narayan
+852 2116 8385
[email protected]
jll.com
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