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Accounting for around 35% of global GDP, the Asia-Pacific region (APAC) is a strong driver of global economic growth. Several factors are driving growth in the region, with domestic consumption being one of them.
“Given its large population base, rising middle class, tech-savvy consumers and relatively higher degree of household savings, APAC is expected to see strong consumption growth going forward,” said Catherine Chen, Senior Director, Investment Strategist, Asia Pacific at Invesco.
According to the asset manager, all these factors are expected to lead to growing demand for real estate in APAC over the long term.
Nuveen, in a recent market analysis, highlights that the youth demographic will help increase the long-term demand for real estate.
By 2030, it’s anticipated that half of the world’s Generation Z will live in the Asia Pacific region. “This digitally savvy and youthful population will help to further accelerate e-commerce penetration and propagate demand for logistics assets, particularly last-mile facilities,” Leo Chung, Director of Research, Strategic Insights at Nuveen, opined and added that rising demand for internet usage from this young user base also supports data centres.
Key investment themes in APAC real estate
Invesco’s Chen pointed out that total real estate return volatility in APAC is generally lower, “both at the fund level and asset level”. Offices in Korea and Singapore, logistics in Australia and Japan, as well as Japan residential are stronger markets and sectors driving growth.
The asset manager has identified three main investment themes in APAC real estate, namely Japan cold storage logistics, Korea senior housing and Australia living.
Japan Cold Storage Logistics: The demand for cold storage facilities in Japan is growing, and a “sizable amount” is relatively old.
Korea Senior Housing: South Korea is the fastest aging society among OECD countries, and there is an increasing need for specialized senior housing while the penetration is still very low.
Australia Living: Migration-driven population growth in Australia is expected to lead to a shortage of 100,000 housing by 2028.
Investment trends in energy infrastructure in APAC
According to the World Energy & Climate Statistics’ Yearbook 2024, APAC is the world’s largest energy consumer. “Future economic and demographic expansion — along with commitments on net zero carbon targets — will create even more investment and business opportunities, particularly in green energy,” said Nuveen’s Chung.
With battery technology playing a critical role in securing clean energy transitions, Chung highlights China’s and South Korea’s roles in the industry as both have a strong manufacturing base along the full value chain.
He further sees Australia emerging in the market for green hydrogen/ammonia. They play an important role in transporting green energy over long distances since they are more cost-effective.
“Its abundant land and renewable resources allow it to produce green hydrogen more affordably than anywhere else in the world. Therefore, it is expected that Australia will become the largest exporter of green hydrogen/ammonia in the world in the next several years,” Chung said.
