AUSTRALIA'S real estate market is poised to benefit from the pending regional economic boom that will come to define the “Asian Centuryâ€, according Jones Lang LaSalle’s head of research David Rees.
Speaking at the Australian Property Institute’s Pan Pacific Congress in Melbourne yesterday, Rees said the Asia Pacific real estate markets were projected to record stronger growth than other regions over the next 20 years.
The region’s investable real estate worldwide would jump from the current 27% to 49% over the 20 years on the back of strong population growth and high urbanisation rates.
“Australia is, and will continue to be, a beneficiary of this trend. Australian real estate offers the potential for attractive returns from both income generation and capital appreciation.
“The combination of higher allocations to real assets and the increased weighting towards the Asia Pacific region will support capital flows into Australian commercial real estate over the medium term,”
Australia already enjoys a disproportionately high share of regional cross-border capital flows. Accounting for approximately 9.1% of the investable universe in the Asia Pacific, over the three years to June 2012 Australia was the recipient of 22.4% of the cross-border capital flows into the Asia Pacific region.
Similarly, of the $US289.9 billion of direct cross-border real estate capital transactions recorded by Jones Lang LaSalle in the three years to June 2012 worldwide in the office, retail, industrial and hotel sectors, Australia’s share was 3.9%, significantly above the 2.5% share the country claims in the investable universe.
“Australia, as a mature economy, will not experience the same growth trajectory as the wider Asia Pacific region. Nevertheless, Australia plays an important role in the Asia Pacific for investors looking for global diversification in their real estate portfolios,” he said.
Rees highlighted Australia’s transparency and its low beta real estate market in the Asia Pacific’s context as pivotal reasons why Asian investors will continue to target assets down under.
He said that of the $6.7 billion that comes into the Asia Pacific from other regions of the globe, 39% of that goes to Australia, ahead of China (17%), Japan (15%) and Singapore (14%).
“One of the hurdles, however, for increased offshore investment into Australia is a lack of product.
“Ownership of core product is heavily institutionalised and the soft tenant demand environment across a range of industry sectors is creating a cyclical slowdown in development and, ultimately asset creation,”
Rees said there was a total of 25.9 million sqm of commercial floor space that had to be developed, financed and owned over the next decade to meet the demands of a growing Australian population.
“The Australian population is projected to increase by 3.4 million people between 2011 and 2021. Assuming normal space per capita figures, this implies an additional 7.5 million sqm of office, 8.2 million sqm of retail and 10.2 million sqm in industrial to be developed in Australia in the next decade.” Rees concluded.
Property Review
