Asia Pacific real estate - Opportunities in dynamic markets - FOR QUALIFIED CLIENTS, WHOLESALE, PROFESSIONAL, QUALIFIED AND INSTITUTIONAL INVESTOR ...
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FOR QUALIFIED CLIENTS, WHOLESALE, PROFESSIONAL,
QUALIFIED AND INSTITUTIONAL INVESTOR USE ONLY –
NOT FOR PUBLIC DISTRIBUTION
(PLEASE READ IMPORTANT DISCLOSURES)
Asia Pacific
real estate
Opportunities
in dynamic markets
2019
MKTG0219A-668707-2292648Contents
4 6 8
Key figures at The view from
a glance Summary the top
12 20
The grand Sector by
tour sector
26
The investment
thesis
MKTG0219A-668707-2292648Authors
Marcus Sperber
Global Head of Real Estate
John Saunders
Head of Real Estate Asia
Bruce Wan
Head of Asia Real Assets Research
MKTG0219A-668707-2292648Key
figures at
a glance
MKTG0219A-668707-2292648Asia Pacific: a big market, with dynamic growth drivers
34
of global GDP
%
output in 2017
Source: IMF (October 2018)
1.5
new middle-class
bn 47
of global GDP growth
%
consumers in 2020s over the next five years
Source: Brookings Institution Source: IMF (October 2018)
(Feb 2017)
35 %
share of institutional real
3.8people across
bn 44
people urbanising
mn
estate globally by 2026 31+ countries every year
Source: PGIM (2016) Source: IMF (October 2018) Source: United Nations (2017)
There is no guarantee that forecasts will come to pass.
O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 5
MKTG0219A-668707-2292648Summary
MKTG0219A-668707-2292648The quick download
This paper provides a high-level guide to direct real estate investment in the Asia Pacific (APAC), particularly from
the perspective of cross-border investors, potentially new to this dynamic part of the world. In this report, we focus
on the macro fundamentals behind the investment case for this region. Specifically, we consider the most prominent
questions for investors heading into these markets, namely, ‘Why Asia?’, ‘Why real estate?’ and ‘Why now?’.
Why focus on Asia Pacific? risk-adjusted returns. What is our view? For core,
the focus on yields and reliable incomes are
In our view, there is a very compelling and
leading investors to Japan, Australia, South Korea
durable growth story across the Asia Pacific
and Singapore. Meanwhile, for value-add, the
region. This swift expansion is being supported
drive for rewarding strategies – through releasing,
by robust population growth, sustained
restructuring and development – opens a wider
urbanisation and rapid income growth. The
array of opportunities in Japan, China, South
relatively stronger growth outlook is, in turn,
Korea, Australia, Singapore and Hong Kong.
supporting tenant demand and rental income
Indeed, persistent market inefficiencies in select
growth on a broad basis. This growth story
real estate markets continue to provide attractive
is pervasive across the region, a trend that is
arbitrage opportunities.
considerably broader than the development of
any one single country or market.
Investing in a changing landscape.
Why concentrate on real estate? Markets are never static. Demographic and
technological trends in APAC are driving
Investors are looking to real estate for consistent
deep structural changes in the pattern of
income returns. According to MSCI data, APAC
tenant demand. Global real estate yields are
markets delivered firmer, less volatile, returns
cyclically low, prompting a greater focus on
over the past ten years, compared to both
rental incomes to support returns. Meanwhile,
North America and Europe. As markets in this
real estate cycles are moving through different
region mature further and capital pools deepen,
phases across the APAC region, which stresses
there will be in our view a more urgent push for
the importance of a pan-regional strategy to
local, high-quality, institutional-grade, income-
enhance diversification and stability of returns.
producing assets.
Risks and opportunities in the outlook?
Why invest now?
All markets carry some risks and this region
APAC real estate markets are improving swiftly
is no different. Rising trade protectionism will
in terms of both liquidity and transparency. On
likely erode growth and sentiment in China and
the back of the stronger growth outlook, APAC
elsewhere, particularly in the manufacturing
markets are gaining considerably in both size
export sector. Rising US rates will impact Hong
and market weight. For investors, there is an
Kong more directly. Rapid supply gains are
escalating underweight position to the APAC
apparent in spot real estate markets, suggesting
region, at a time of relatively firmer regional
considerable value-add from active leasing
growth and strong historical returns.
strategies and market / sector selection. Credit
tightening are adding to financial system
What are the potential strategies?
stability in China and also creating opportunities
There is a wide range of opportunities in APAC
working with capital-constrained developers
markets, depending on investors’ appetite for
and landlords.
O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 7
MKTG0219A-668707-2292648The view
from the
top
MKTG0219A-668707-2292648Setting the scene For these and other reasons, we think that real estate
investors should be looking broadly across the APAC
for investors region for opportunities in these rapidly-growing real
estate markets.
For many institutional real estate investors, putting
capital to work abroad takes considerable time and In this context, this white paper is structured to
energy. Overcoming home bias and getting sufficient provide a high-level introduction for direct APAC real
clarity on foreign markets are real and tangible estate markets. Specifically, we outline the real estate
challenges for many potential cross-border investors. investment thesis for the APAC market; provide an
This is similarly true for real estate investors heading into overview into key markets and sectors; consider some of
the APAC region, particularly for the first time. the thematic market drivers; and discuss potential risks
to the outlook.
So why focus on APAC real estate? What is the
market outlook? Where are the potential investment
opportunities? This paper is written to provide some What are the key
answers to these and other common investor questions.
macroeconomic themes?
In our view, there is a strong fundamental case for
Looking across the APAC region, there are a number of
increased attention and allocation into the APAC region,
important macroeconomic trends and themes, related
centred on a number of key macroeconomic themes
to the real estate market outlook.
driving the rapid development of these dynamic real
estate markets. There is relatively stronger economic • Strong growth is supporting demand. Overall,
growth, which serves to support tenancy demand APAC economies are lifting broadly on the back of
and potential returns. There are diverse market robust and sustained economic growth. While the
opportunities, given a broad range of cities and sectors unprecedented scale and pace of development
moving through different phases of the market cycle. in China is the dominant economic story of
Moreover, there are significant diversification benefits our generation, the pattern of robust growth
from a broad regional market exposure. is considerably broader than just China. Other
Figure 1: Robust growth outlook across a broad Figure 2: APAC growth expectations are easing
range of APAC regional economies modestly on US trade concerns
Real GDP growth (2019-23, % p.a.) Real GDP forecasts – rolling 5 years ahead, % p.a.
8
India 7.7%
China 5.9%
6 Asia Pacific
Indonesia 5.2%
Hong Kong 3.0%
South Korea 2.7% 4
United States
Australia 2.7%
Singapore 2.7% 2
US 1.8%
Eurozone
Euro area 1.7%
APAC 0
Japan 0.6%
4.6%
2000 2003 2006 2009 2012 2015 2018
Source: IMF, BlackRock (January 2019) Source: IMF, BlackRock (January 2019)
There is no guarantee that forecasts will come There is no guarantee that forecasts will come
to pass. to pass.
O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 9
MKTG0219A-668707-2292648maturing markets in the region (India, Indonesia
What are the main drivers
and Malaysia) are similarly taking off due to the
virtuous pattern of increased productivity, sustained of structural change?
urbanisation and rising incomes. Without a doubt,
Several significant and enduring demographic trends are
the benefits of these developments spill out very
adding to the robust fundamental demand across APAC
broadly – through trade, tourism and capital flows
real estate markets.
– to affect more mature markets in the APAC region
as well (Japan, South Korea and Australia). More • Population growth is lifting demand. Robust
tangibly, the key financial, services and logistics population increases remain a critical driver of
hubs in this region (Hong Kong and Singapore) fundamental real estate demand. While APAC
stand to be very direct beneficiaries of these long- population growth is relatively upbeat (2019-23:
running development trends. +0.9% p.a.) and well ahead of the pace in advanced
economies (+0.4% p.a.), there are wide divergences
• Economic outperformance to persist. In absolute between different countries and particularly different
terms, the medium-term (five-year ahead) economic cities, driven by birth rates and migration. Indeed,
growth expectations are considerably stronger for Melbourne, Sydney and Singapore stand out in
the APAC region (2019-23: 4.6% p.a.), compared to terms of migrant-led expansion, which is adding
Europe (1.7% p.a.) or North America (1.9% p.a.). In to residential and commercial space demand.
other words, for every $100 of new income created Meanwhile, population ageing and emigration are
globally in the next five years, $47 of this will be reducing the population base in Seoul and Osaka. The
created in the APAC region. Certainly, part of this most interesting case is in Tokyo, where strong net
outperformance is related to the rapid pace of immigration from provincial Japan are underpinning
economic development in India (7.7% p.a.), China robust real estate demand, more than reversing the
(5.9% p.a.), and Indonesia (5.2% p.a.). However, nationwide trends of population decline and ageing.3
this pattern of firm regional growth is considerably
broader than emerging markets and encompasses • The Asian middle class arrives in earnest. With the
Hong Kong (3.0% p.a.), South Korea (2.7% p.a.), rapid growth in economic activity and household
Australia (2.7% p.a.) and Singapore (2.7% p.a.) as well.1 incomes, there is a seismic shift centred on the
accelerated growth of middle-class households. In
• Interest rate settings remain accommodative. In
Asia, there is an estimated 1.5 billion new middle
the context of a sustained tightening in US interest
class consumers emerging in the 2020s, contributing
rates (+225 bps since 2015), the equivalent settings
around 89% of gains globally. Four of the top five
in the APAC region are generally still very low and
middle-class consumer markets will be located in Asia
accommodative. In particular, cash rates in Japan,
by 2030. The middle-class squeeze for US retailers
China and Australia remain at their cyclical lows,
is largely absent in Asia. Moreover, this middle-class
with no near-term impetus to tighten. South Korea
expansion will underwrite sustained growth in retail
has tightened modestly (+50 bps), while Hong Kong
spending growth and space demand, notwithstanding
(+225 bps) have tracked US policy moves to maintain
headwinds from e-commerce take-up.4
its currency peg. All in all, the adverse drag from
tightening monetary policy and rising funding costs • Urbanisation is boosting demand in cities. Markets
are still not in consideration in APAC markets (outside across the region are clearly in different stages of
of Hong Kong).2 economic development. For many markets across
Asia, relentless urbanisation is still a considerable
1 Source: IMF, BlackRock (January 2019). 2 Source: Bloomberg, BlackRock (January 2019). 3 Source: Oxford
Economics, Statistics Bureau of Japan, BlackRock (January 2019). 4 Source: Brookings institution
(Kharas 2017), BlackRock (January 2019), middle class is defined here as households with incomes of
US$10 to US$100 per day (in 2005 dollars, PPP terms).
10 A SIA PACIF IC R E A L E STAT E
MKTG0219A-668707-2292648factor driving rapid growth in major cities, given the • E-commerce continues to divert real estate demand.
ongoing structural shift of workers from farms and The rapid rise of online shopping – at a notably
factories to white-collar services. Indeed, the current more aggressive pace in China and South Korea – is
pace of urbanisation is staggering, with 44 million actively diverting space demand from in-store retail
people moving into cities across the APAC region to out-of-store logistics and distribution. To be sure,
every year; creating the equivalent of a New York developers are acutely aware of this trend, prompting
City or Greater London every 2½ months. 5
massive new supply in consumer logistics (and a more
subdued outlook for rental growth). Nevertheless,
• Demographic trends are changing demand investors are still drawn to this sector for relative yields
patterns. The changing population profile is leaving and the prospects for relative yield compression,
an indelible mark on the pattern of real estate compared to other sectors.
demand in Asia. Beyond regular population growth,
ageing is urgently adding demand for healthcare and • The sharing economy is gradually emerging.
aged care, particularly in markets with higher median Newly-minted business models of coworking and
age like Japan (48 years by 2020, highest in the coliving promise a lot to end-users, including
world), Hong Kong (45), South Korea (43) and even greater flexibility, lower fixed costs and a modern
China (39). Meanwhile, rising longevity is lengthening millennial vibe. For landlords, these models are still
the duration of real estate demand, particularly as untested, particularly over a full business cycle and
APAC life expectancy is rising from 73 years of age periods of sluggish tenant demand. Certainly, the
currently, at a rate of five hours every day. 6
critical (and unsettled) question today is – should
landlords support these concepts with higher
Meanwhile, technological change is driving ongoing incentives and initial fit-out costs, in return for
disruption to traditional real estate sectors in Asia and higher effective usage ratios, increased foot traffic
elsewhere, potentially upending older business models and a potential valuation effect?
in the process.
Figure 3: APAC interest rates remain low, lagging Figure 4: Population growth outlook varies markedly by
the sustained US tightening cycle city, due to demographics and migration
Cash interest rates Population growth (2019-23) % p.a.
8%
Melbourne 1.8%
Sydney 1.4%
6
Singapore 1.0%
Australia Shanghai 0.9%
4
Kuala Lumpur 0.8%
Hong Kong 0.7%
S. Korea US
2
Beijing 0.6%
Eurozone
Tokyo 0.3%
Japan
0
Seoul -0.3%
-1 APAC
Osaka -0.3% 0.9%
2000 2003 2006 2009 2012 2015 2018
Source: Bloomberg, BlackRock (January 2019) Source: Oxford Economics, IMF, BlackRock
(January 2019). There is no guarantee that forecasts
will come to pass.
5 Source: United Nations, BlackRock (January 2019), New York City is a subset of the broader NY MSA
tabled in figure 5. 6 Source: United Nations, BlackRock (January 2019).
O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 11
MKTG0219A-668707-2292648The grand
tour
MKTG0219A-668707-2292648An investor’s guide to In the context of market selection, the key
considerations at each level are often related to market
APAC markets transparency, liquidity, and the capacity to deliver on
investors’ return and risk expectations. To be sure, these
At the outset, it is worth highlighting that the Asia Pacific
criteria for market selection not only apply superficially
is not a singular, monolithic real estate market. The
at a national level, but very specifically and more usefully
APAC region is comprised of a diverse range of countries
at a city and even sub-market level. The following
and sub-regions, each with their own idiosyncratic
section outlines the features and characteristics of key
demand, supply and income and capital market
real estate markets in the region.
dynamics. In other words, any informed discussions
about regional investment market opportunities require
us to delve a little deeper, beyond the headlines, into
each country and sub-region.
Figure 5: Key city markets across the Asia Pacific
Population (millions, GDP (USD per Fortune 500 Market transparency
City Country
2017) capita, 2017) Headquarters (2018) (2018)
Tokyo* Japan 13.8 92,300 36 Transparent
Osaka* Japan 8.9 73,400 7 Transparent
Sydney Australia 5.1 74,600 2 Highly transparent
Melbourne Australia 4.9 63,900 1 Highly transparent
Brisbane Australia 2.4 62,000 0 Highly transparent
Perth Australia 2.1 100,000 1 Highly transparent
Shanghai China 24.2 19,400 7 Semi transparent
Beijing China 21.7 17,900 20 Semi transparent
Guangzhou China 13.9 24,400 3 Semi transparent
Shenzhen China 11.7 25,500 6 Semi transparent
Hong Kong China 7.4 42,700 8 Transparent
Singapore Singapore 5.6 62,000 3 Transparent
Seoul South Korea 9.7 34,000 13 Transparent
Reference:
†
London Great Britain 8.9 73,400 14 Highly transparent
New York ‡ United States 20.3 82,600 16 Highly transparent
Source: Fortune, Jones Lang LaSalle, Oxford Economics, US BEA, US Census Bureau, BlackRock
(January 2019). * Prefecture level, † London NUTS2 region, ‡ New York, Newark, Jersey City MSA. 2017.
Note, New York figure is latest available.
O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 13
MKTG0219A-668707-2292648Australia is a medium-sized, open economy (13th in size) Japan is a major, open economy (3rd in size) with a
with well-established and highly transparent real estate remarkable industrial sector and well-established
markets (2nd most transparent globally).7 and transparent real estate markets (14th most
transparent globally).10
• The economy has shown remarkable resilience over
an extended period, with the current expansion • The economy has undergone a long period of
running into its 27th year (the longest run for difficult structural adjustment following a massive
any developed economy in modern history). Key 1980s boom and the subsequent ‘lost decade (and
factors behind its resilience include its robust pace a half)’ in the 1990s and early 2000s. Since the mid-
of population growth (+1.6% y/y) and rapid trade 2000s, however, there have been more consistent
integration with China. More importantly, vital and convincing signs of structural recovery, marked
economic shock absorbers (flexible exchange rates by stronger bank balance sheets, positive inflation
and responsive monetary & fiscal policy settings) and market reforms. Indeed, on the back of this
have helped the economy weather dramatic virtuous cycle, the economy is currently running a
external shocks (particularly the Asian and Global durable economic expansion, with impressive uplift
Financial Crises in 1997 and 2008). 8
in both the corporate sector and the labour market.
The key longer-term challenges for Japan are
• Despite its large geographic scale, the Australian related to its demographics, particularly the ageing
market is highly urbanised, with activity and and shrinking population base.11
demand largely concentrated into a small
handful of cities, particularly Sydney, Melbourne, • Certainly, Tokyo dominates the Japanese market
Brisbane and Perth. Of these markets, Sydney and landscape. Tokyo’s market size is huge, regardless
Melbourne have more diversified local economies, of how you draw the boundary around the metro
including sizeable financial and business services region (population: 33 million), the prefecture (13
tenant sectors. Brisbane has a relatively larger million) or just the 23 wards (9 million). The Greater
exposure to agriculture, mining and tourism. Perth Tokyo region is the largest metropolis in the world,
has traditionally been dominated by the resource with the largest office market in the world, and home
sector, with market cycles highly synchronised to the most Global Fortune 500 headquarters. The
to fluctuations in mining construction and key demographic challenges facing broader Japan
commodity prices. are less pressing in Tokyo. The long-running trend
for younger, more educated, migrants to move
• Australian real estate capital markets are marked into Tokyo is supporting robust population growth
by a mature REIT market and a sizeable pension (+1.0% y/y), which drives a broad spectrum of real
sector (4th largest globally). Cap rates are relatively estate demand, particularly in the inner wards of
high, when compared to offshore markets, which Tokyo. Notably, Osaka is also a sizeable real estate
draw a lot of yield-seeking investors. Given market in its own right, with a mature and diverse
keen participation by local REITs, domestic regional economy (and very healthy representation
superannuation funds and offshore investors, trophy of global headquarters). More broadly, the next
assets are perennially expensive and tightly held. tier of smaller Japanese cities – Fukuoka, Nagoya,
That said, that competition becomes less intense Yokohama, Sendai and Sapporo – are starting to
further out into the value-add and opportunistic emerge onto institutional radar screens, albeit with a
segments, given fewer active players.9 smaller pool of investment-grade assets and thinner
market liquidity.12
7 Source: JLL, IMF, BlackRock (January 2019). 8 Source: ABS, IMF, BlackRock (January 2019).
9 Source: ACSI, BlackRock (January 2019). 10 Source: IMF, BlackRock (January 2019).
11 Source: Bloomberg, Statistics Bureau of Japan, BlackRock (January 2019).
12 Source: Bloomberg, JLL, Fortune, IMF, Statistics Bureau of Japan, BlackRock (January 2019).
14 A SIA PACIF IC R E A L E STAT E
MKTG0219A-668707-2292648• Japan capital markets are marked by sizeable China is a globally-significant and rapidly-modernising
capital pools and a deep REIT sector (2nd in size economy (2nd in size). Market transparency is still a
globally). At the same time, there are considerable work in progress (33rd globally), despite considerable
market inefficiencies (sometimes driven by a improvements over the past decade.14
preference for quiet, off-market trades) and market
• The economy is still undergoing a remarkable and
fragmentation (especially between institutional and
speedy transition from a command and control
private investors), all of which can create meaningful
economy, to one that is more affected by market
arbitrage opportunities. Related to all this, barriers
forces. Economic activity has evolved significantly
to entry in Japan are high for foreign investors, and
even in the past decade, previously driven by
those without a credible local presence are
manufacturing and exports, and now considerably
largely ineffective, given limited access to deal
more diversified as the activity base moves to
sourcing and financing. Low rates in funding
higher value-add, increased services component
markets are being anchored by the continued
and greater focus on domestic consumers. Rising
application of zero interest rate policy and yield
trade barriers and intellectual property controls
curve control, which are prompting cheap funding
loom as a drag on growth ahead.
and eager lenders, notably more so for locally-
established borrowers.13
Figure 6: Key real estate markets at a glance
China Japan
Population 1.4 billion Population 127 million
Economic size 2nd Economic size 3rd
Transactions $ 36 billion Transactions $ 35 billion
Market transparency 33rd Market transparency 14th
Hong Kong South Korea
Population 7 million
Population 51 million
Economic size 34th
Economic size 11th
Transactions $ 30 billion
Transactions $ 19 billion
Market transparency 13th
Market transparency 31st
Singapore Australia
Population 6 million Population 25 million
Economic size 37th Economic size 13th
Transactions $ 8 billion Transactions $ 30 billion
Market transparency 12th Market transparency 2nd
Source: IMF, JLL, RCA, BlackRock (January 2019). Population and economic data are for 2017.
Transparency data are for 2018. Transaction data are for the year to mid-2018.
13 Source: Bloomberg, BlackRock (January 2019). 14 Source: IMF, JLL, Lloyds, BlackRock (January 2019).
O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 15
MKTG0219A-668707-2292648• As with any rapid structural adjustments, there are in China, there is a wide array of tier-2 and tier-3
clear winners and losers. With the continued influx markets with impressive demand growth credentials,
of internal migrants, rising concentration of middle- but they always sit lower on the investor radar
class consumers and increasing sophistication in screen, given reduced market liquidity, less market
knowledge-based industries, Tier-1 cities stand transparency and more variable supply pipelines
out in terms of reaching critical market mass and (reflecting different local planning regimes).
growing international influence. On the other hand,
key regional markets (Northeast industrial and inland • Chinese capital markets are still evolving, broadly
manufacturing hubs) are being visibly hampered by tracking the progress in the wider real economy.
excess capacity (particularly in steel making) and rising Equity markets are becoming more interconnected
manufacturing costs (driving a familiar hollowing with global peers, slowly improving in terms of
out process). Taken altogether, rising incomes, the market breadth and depth. Listed REITs are still
emerging middle-class and a progressive move up working hard to gain market acceptance, which
the value-add chain, are combining to drive a robust (if successful) could introduce more patient rent-
pattern of real estate demand, very much channelled collecting investors into a volatile listed equities
in a broad range of city markets. environment. Land use zoning is still a source of
uncertainty for investors more used to Western
• For most institutional investors, the default focus norms. Capital restrictions (particularly the income
in China is on the Tier-1 cities of Shanghai, Beijing, cash trap) remain a deterrent for core, income-
Guangzhou and Shenzhen. Shanghai is easily the minded investors.
largest and most liquid commercial real estate
market in China, with a relatively mature regulatory Hong Kong is a small, very open economy (34th in size),
and transactional support framework. Shanghai with a very liquid (and cyclical) real estate market and
also stands out in terms of the diversity in its tenant good market transparency (13th globally).15
base, particularly given its vital role in domestic
financial and business services. Rapid infrastructure • The economy has benefited strongly from the
development and growth (especially a services robust growth in broader China, particularly in
sector boom) are notably reshaping Shanghai the neighbouring markets within the Guangzhou
through a steady decentralisation process. It remains province. Hong Kong remains a key financial,
a vital logistics hub, with the busiest container logistics and services hub for China and the overall
port in the world. Beijing remains the critical Asian region. With a high exposure to regional
core of the corporate and government sectors in trade (exports were 188% of GDP in 2017), the
China. It is a relatively smaller real estate market, economy is relatively sensitive to shifts in trading
with assets being more tightly held. Interestingly, volumes. Notably, the exchange rate is pegged to
the rapid emergence of the technology sector the US dollar, providing currency stability, but at
(anchored by two globally-renowned engineering the expense of interest rate policy controls. In this
schools) is driving the creation of a regional tech regard, US rate tightening are being matched in HK
cluster. Meanwhile, Guangzhou and Shenzhen are rates, with the stronger currency adding purchasing
maturing as sizeable and increasingly liquid real power, but reducing competitiveness.16
estate markets. The local economies are lifting
swiftly on the back of growing integration across • Hong Kong has long had a deep and mature
the Greater Bay Area; buoyant manufacturing, trade capital market, with a robust regulatory framework
and logistics activity growth; and the emergence and strong market transparency. The real estate
of a world-leading technology cluster. Elsewhere market remains a focal point for mainland Chinese
15 Source: IMF, JLL, BlackRock (January 2019). 16 Source: Census and Statistics Department, BlackRock
(January 2019).
16 A SIA PACIF IC R E A L E STAT E
MKTG0219A-668707-2292648investors, particularly more so since the progressive trading route (25% of global trade), with the second
withdrawal of Chinese capital from offshore markets busiest container port in the world. With a high
in Europe and the US. Cap rates are exceptionally exposure to regional trade (exports were 172% of
low, and pushing lower, given the large volumes of GDP in 2016), the economy is relatively sensitive
Chinese buyers who invest for non-market reasons to cycles in the global economy. Monetary policy
(store of value). Market cycles tend to be relatively is enacted through a managed exchange rate
short, with the average office pricing upswing basket, where the current round of policy tightening
lasting less than three years. That said, the current is coming through as a modestly appreciating
upswing is proving unusually durable (running into Singaporean dollar.19
its 7th year in 2018).17
• Singapore continues to operate a mature and
Singapore is also a small and open economy (37th in transparent capital market, with a deep listed REIT
size), with a very liquid (and cyclical) real estate market sector. There is good market transparency with
and good market transparency (12th globally).18 easy access for foreign investors for both deals and
financing. Like Hong Kong, the Singapore real estate
• The economy continues to be a strong performer, market tends to be cyclical, reflecting both global
holding a persistent regional advantage as the pricing cycles and local demand-supply dynamics.
financial, services, advanced manufacturing, The average office pricing cycle lasts around three
healthcare and logistics hub for a sizeable South years. Importantly, the Singapore market is late to
East Asian market (with a population of 640 million). the regional upswing in this cycle, given the recent
It retains a strategic position atop the world’s busiest round of commercial supply in 2016.20
Figure 7: Transaction volumes are spread broadly across Figure 8: Real estate market transparency are
several key markets improving broadly across the region
Transaction volumes (annual, % of APAC, year to Q2 2018) Market transparency (2018)
Semi-transparent Transparent Australia
New Zealand
21 %
Japan 21 %
China
Singapore
Hong Kong
Japan
Malaysia
18 %
Hong Kong 17 %
Australia S. Korea
2008 2018
Highly-
China transparent
4% Singapore India
11 %
S. Korea 5% Other Indonesia Rank
3 %
India
60 40 20 0
Source: RCA, BlackRock (January 2019) Source: JLL, BlackRock (January 2019)
17 Source: Census and Statistics Department, IMF, BlackRock (January 2019). 18 Source: IMF, JLL,
BlackRock (January 2019). 19 Source: ASEAN, IMF, JLL, Lloyds, Singstat, BlackRock (January 2019).
20 Source: Bloomberg, BlackRock (January 2019).
O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 17
MKTG0219A-668707-2292648South Korea is a medium-sized, open economy Other regional markets may present potentially viable
(11th in size) with a deep and transparent real estate investment opportunities, although they are generally
market based around its capital, Seoul (31st most very low on investment priority lists, given a variety of
transparent globally). 21
fundamental market drivers.
• The economy has tracked a remarkable • New Zealand, Taiwan and Macau are relatively
development path since the 1970s, as the largest of wealthy economies. For institutional investors, the
four so-called ‘Asian Tigers’. Since that time, South New Zealand market is largely confined to Auckland,
Korea has created a number of highly-renowned where the market is strong, well-developed and
advanced production sectors, particularly in the highly transparent, but hard to draw a consistent
technology and heavy manufacturing segments. transactional pipeline given its smaller size. Asset
The economy is currently tracking a moderate pricing in Taipei is relatively challenging. Yields
expansion, well supported by the strength of are exceptionally low, being dominated by a few
regional demand. On the geo-political front, sizeable life insurers (who are constrained by
there are more encouraging signs of diplomatic regulation to have largely home-bound portfolios).
engagement between neighbouring North Korea Macau is a very small market of 650,000 people,
and the rest of the world. Whether we see any actual with a disproportionate skew in the economy
progress on an official cessation of hostilities or towards casino gaming (72% of GDP, 89% of
eventual denuclearisation, there is at the very least government revenue).23
a tangible decline in confrontational rhetoric and
military posturing. • Malaysia, Indonesia, India, Thailand and Vietnam
are emerging economies with considerable size
• For inbound investors into South Korea, the typical and impressive growth prospects. That said, given
focus is on the Seoul Capital Area, which includes their current stages of economic and market
Seoul, Incheon and broader Gyeonggi region. development, the pools of investment-grade
Altogether, this regional area of 24 million people assets are still relatively small, market transparency
forms the 5th largest urban agglomeration in the measures are either lagging (or weakening) and
world. Given the strengths of the corporate and market liquidity is still somewhat constrained.
manufacturing sectors, there is good fundamental
space demand across the board, including both
the office and logistics sector. Trophy office
assets are generally held tightly, with more open
access outside of premium office grades and in
other sectors. Market transparency is continually
improving, officially upgraded to ‘transparent’ status
in 2018.22
21 Source: IMF, JLL, BlackRock (January 2019). 22 Source: Invest Korea, BlackRock (January 2019).
23 Source: AMCM, DICJ, BlackRock (January 2019).
18 A SIA PACIF IC R E A L E STAT E
MKTG0219A-668707-2292648O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 19
MKTG0219A-668707-2292648Sector by
sector
MKTG0219A-668707-2292648What is the APAC In terms of relative pricing, there are some clear trends
taking hold in APAC sector cap rates.
perspective by sector?
• In the context of a continuing economic upswing
Beyond market selection, there is a critical discussion on and abundant capital, cap rates are still
sector selection. The APAC region, as with other compressing on a sustained basis across the
parts of the world, are seeing significant demographic region. That said, the pace of yield compression is
and technological changes impacting heavily on the more moderate to mid-2018 (-26 bps per annum),
both the tenancy and rental income outlooks for various particularly compared to the more aggressive pace
market sectors. of recent years.25
Looking at APAC transaction volumes, the market • While the overall compression trend is being
continues to be dominated by the office sector, which mirrored broadly across the market, the spreads
still accounts for the majority of trades in commercial between sectors are narrowing. In part, this reflects
real estate (52% share, year to Jun-18). The industrial / the keener investor drive for higher-yielding sectors
logistics sector is the prime mover of recent years like industrial and logistics (and in the process
(15% share), on the back of buoyant investor bidding away this premium). Also, there is a related
expectations for space demand, in light of the unfolding process where investors are substituting within
global e-commerce boom. Rising share of industrial are sectors to higher-yield segments, from prime to
coming partly at the expense of retail (20% share), which secondary, from central to suburban locations, and
continues to ease on a relative basis. Meanwhile, the from core to core-plus and beyond.
remainder are also seeing a relative decline, but more so
in multifamily rather than hotels.24
Figure 9: Office sector leads trading volumes, while Figure 10: APAC cap rates continue to trend lower;
industrial lifts steadily sector spreads are also tightening
APAC transaction volumes (% share) APAC cap rates
60% 9%
Office
8
Industrial
40
7
Office
Retail 6
20
Other
5
Industrial
Retail
Apartments
0 4
2008 2010 2012 2014 2016 2018 2008 2010 2012 2014 2016 2018
Source: RCA, BlackRock (January 2019) Source: RCA, BlackRock (January 2019)
24 Source: RCA, BlackRock (January 2019). 25 Source: RCA, BlackRock (January 2019).
O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 21
MKTG0219A-668707-2292648Office remains the most sizeable and liquid segment of • Structural change continues to impact visibly on
the APAC real estate market. office demand. Changing composition of economic
activity to white-collar service sectors (and more
• In our experience, there are consistently full
recently to information technology) are strongly
pipelines for transactions across major office
supporting office tenancy, especially in China.
markets, particularly in Japan, Australia, China,
The ongoing trend for decentralisation – driven in
Hong Kong, Singapore and South Korea. Capital
varying degrees by lower rents, newer infrastructure
from mainland China are still prominently active,
or better amenities – are shifting office workers out
particularly in Hong Kong. On-market assets are
of the CBD and into more convenient periphery
hotly contested, especially those in the highly-
locations. This trend is particularly notable in office
sought trophy category. With tightening cap rates,
markets like Shanghai, Seoul and Sydney.
investors are accommodating the shift in pricing
either with lower entry yield expectations and/or • Meanwhile, the ongoing rise of the coworking
increasing focus on future rental growth potential. concept is driving aggressive take-up of space across
In this context, it is important to note the wide many APAC markets. Flexible workspace penetration
range of divergent trends in office market rents rates are lifting quickly across the region, led by
across the region. Indeed, some office markets are Bengaluru and Delhi (both 18% of the office market
currently seeing sustained booms in rents given in 2018), with swift gains in other markets including
strong demand growth, limited supply and low Shanghai (8% share), Singapore (4%), Hong Kong
vacancies (e.g. Singapore, Sydney and Melbourne). (3%) and Sydney (3%). While some consolidation
Conversely, other office markets are seeing weaker of flex-space operators are likely from here, these
rental trends, mostly related to subdued demand or service providers are still reaching for higher share of
large gains in supply (e.g. Seoul, Brisbane the overall office market. For landlords, flexible space
and Shanghai). offerings will likely be a permanent feature of the
market, although the eventual penetration rate will be
tested over the next office market cycle.26
Figure 11: APAC office markets vary greatly in terms Figure 12: Middle-class consumers are driving a
of occupancy and rental trends different retail tenant cycle in China
Office rents & vacancy (Q2 2018) Retail net absorption
18% 450
Singapore
15
Sydney 300
Net effective rents (% p.a.)
12
Index Q1 2008 = 100
Melbourne
China 13 cities
9
Tokyo Guangzhou 150
6
Hong Kong Perth
3 Beijing
0
Osaka Taipei
0 Shenzhen US 75 markets
Shanghai
Seoul Brisbane
-3 -150
0 5 10 15 20 25% 2008 2010 2012 2014 2016 2018
Vacancy rate (%)
Source: JLL, BlackRock (January 2019) Source: JLL, BlackRock (January 2019)
26 Source: Colliers, BlackRock (January 2019).
22 A SIA PACIF IC R E A L E STAT E
MKTG0219A-668707-2292648Retail continues to be a meaningful and sizeable • To be clear, the demand profile for APAC industrial
segment of the APAC real estate market. space is broader than just consumer logistics. The
continuing emergence of advanced manufacturing
• The retail sector is diverging in terms of underlying
is still adding to space demand in this region.
sales performance. Strong income growth and
Meanwhile, traditional factory space across the
rising number of middle-class consumers are driving
region is also being actively repurposed as relatively
robust uplift in consumer spending, particularly in
more affordable office space and even hydroponic
emerging markets. That said, even more established
and aquaculture facilities. Overall, the progressive
markets (in Japan, Australia, Hong Kong and
institutionalisation of the industrial sector is driving
Singapore) are feeling the positive benefits through
a process of structural cap rate compression relative
upbeat growth in tourism volumes and spending,
to other sectors. The key challenge in this sector is
despite more moderate trends in local income and
to realise rental income growth and occupancy in
spending growth.
the face of new supply.
• The retail sector is definitely going through deep
Multifamily real estate is an emerging sector slowly
structural change as e-commerce partially diverts
getting more traction in this region.
consumer spending from brick-and-mortar stores
to their online counterparts. That said, it is two-way • Besides residential development, the institutional
traffic, as some pure online retailers start to make multifamily market is largely confined to Japan,
their way into shopping centres with physical outlets. and particularly Tokyo. In part, this reflects the
While this online shift is driving a deep disruption strongly favorable residential market dynamics in
in mature retail markets, particularly in the US, Tokyo, including sustained migration from rural
this trend is being offset to a significant degree Japan, higher propensity to rent and elevated
by favorable demographic trends in this region. prices driving poor housing affordability. Elsewhere,
Specifically, the combination of rising incomes there are nascent multifamily strategies emerging in
and the emergence of middle-class consumers are other markets like Shanghai and Sydney. That said,
driving a markedly different trend in off-line retail developments in these and other locations continue
spending (and retail tenant net absorption). to be hampered by very low investment yields and
competition for land and stock from the built-for-
Industrial real estate is rapidly gaining momentum sale market. Indeed, the search for sufficient income
across the APAC region, given a number of supporting yields remains the key long-term challenge for the
structural drivers. APAC income-producing residential sector.
• The most significant driver in APAC industrial relates
• Moreover, government policy risk is a key (and
to the unmitigated rise of e-commerce retailing
underappreciated) factor in residential markets,
and the associated space demand for modern
compared to commercial sectors. Across the
consumers logistics. To be sure, this demand trend
APAC region, periodic amendments to manage
for online distribution is widely-recognised by both
housing affordability and investor demand (and
investors and developers, prompting an aggressive
particularly Chinese cross-border capital flows into
supply response across the APAC region in both
residential markets) are highly-visible and disruptive
high-growth markets (tracking the pace of consumer
drivers of residential pricing cycles across the
spending growth and infrastructure roll-out) and
region, including China, Hong Kong, Singapore
even low-growth markets (to upgrade and replace
and Australia.
obsolete capacity).
O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 23
MKTG0219A-668707-2292648Alternative real estate sectors remain clearly on the • Senior care / healthcare are both sectors facing
investment radar, although finding sufficient scale and very strong growth prospects, reflecting the impact
comfort on operating exposures are key considerations of the ageing population in driving sustained
in these smaller, but swiftly-growing, real estate demand and rising incomes in supporting relative
market segments. affordability of care. The key issue for this sector
remains the potential for reputational risk from
• Hotels remains a small and highly-specialised
operators and finding sufficient scale in a relatively
investment sector. Assets in this segment continue
small, nascent market segment, particularly in
to be popular, particularly with high net worth
the Asia-Pacific region where there are very few
investors, who are driving very tight pricing. In
operating platforms of scale.
our view, the key factor in this segment is finding
sufficient risk-adjusted returns for landlords, given
• Data centres also face robust demand growth,
the nature of operating contracts that preferentially
given the strength of take-up for data-intensive
benefit hotel operators, typically at the expense of
services, whether through e-commerce,
real asset owners.
m-commerce or cloud-computing services. The
real estate component is relatively simple, with
• Student accommodation is a swiftly-growing
the sector’s profitability more affected by power
real estate segment, particularly given the rapid
costs and operational reliability. For major hi-tech
increases in household incomes and student
corporations, there is scope to leverage self-use to
mobility. In many ways, this is a neat real estate play
seed occupancy. As with other alternatives, finding
to capture emerging market student and income
scale is a challenge.
growth (from China and India) in more-established
real estate markets (like Australia and Singapore).
Finding sufficient scale and occupancy (amidst
spot instances of oversupply) are the key investor
considerations in this expanding sector.
24 A SIA PACIF IC R E A L E STAT E
MKTG0219A-668707-2292648O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 25
MKTG0219A-668707-2292648The
investment
thesis
MKTG0219A-668707-2292648Why invest in Asia Pacific • Markets are growing swiftly in size. With rapid growth
in APAC activity and incomes, there is a correspondingly
real estate? robust expansion in the APAC institutional-grade real
estate market as well. Real estate markets in the APAC
There is a compelling and enduring growth story. First
region are estimated to be around 29% of the global
and foremost, the relatively firmer APAC growth outlook
institutional market in 2018 and rising rapidly. On current
provides strong fundamental support for space demand
growth projections, this would see the APAC region
and investment returns.
overtake Europe in size by 2020 and North America in
• Durable outperformance in growth ahead. As size by 2022. For investors, there is an escalating risk
noted in the outlook section, APAC economic that, given any static or lagging allocation, typical real
growth is expected to remain firm (2019-23: 4.6% estate portfolios would grow increasingly underweight
p.a.), more than doubling the pace expected for on the APAC region, in the context of regional growth
either Europe (1.7% p.a.) or North America (1.9% and investment opportunities.
p.a.). It is not just China and India, with relatively
• Growth begets market returns. It is not just about
firmer growth in mature markets like Australia, South
market size, as stronger demand growth provides a basis
Korea, Hong Kong and Singapore – while Japan
for stronger investment returns. At a very simple level,
is a notable exception here. It is not just measures
economic growth is well-correlated with investment
of broad economic activity either, with relatively
returns over any lengthy time span. At a pragmatic level,
stronger growth for APAC in population, consumer
other facets of growth, including tenant and investor
spending, e-commerce spending, household
demand also matter significantly for returns. To be clear
incomes and external trade compared to Western
though, growth drives unlevered returns. The level
advanced economies.27
of interest rates (and available leverage) also matter
significantly for levered returns, especially in a low-rate
and high-spread markets like Japan.
Figure 13: Firmer APAC growth will drive a sustained lift Figure 14: Historically, stronger GDP growth translated
in relative market size to firmer unlevered asset returns
Share of real estate market (investment grade, % share) GDP growth & office returns (2008-17, %p.a.)
50% 20%
Guangzhou
Projections Asia Pacific
Beijing nd
tre
40 15 on
ati
2022 Hong Kong
rrel Shenzhen
Office total return
Co
Sydney
30 North America Adelaide
10
Melbourne
Seoul Shanghai
Taipei
2020 Europe Singapore
20 5 Osaka
Perth
Tokyo Brisbane
10 0
2016 2020 2024 2028 2032 2036 -2 0 2 4 6 8 10 12%
Real GDP growth
Source: IMF, PGIM, BlackRock (January 2019) Source: JLL REIS, Oxford Economics, BlackRock
There is no guarantee that forecasts will come to pass. (January 2019)
27 Source: IMF, BlackRock (January 2019).
O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 27
MKTG0219A-668707-2292648The real estate markets of APAC provide deep and sources of market arbitrage. Namely, many private
diverse opportunity sets as well, in the form of investors in the region simply lack professional
divergent market cycles, potential diversification asset management skills. Nearly all core investors
benefits and persistent scope for market arbitrage. are not in a position to take any degree of leasing,
restructuring or refurbishment risks to enhance
• Divergent trends form a powerful diversification
asset values. Major markets like Japan and China
story. The wide range of different APAC real estate
are not readily accessible and heavily segmented,
markets, in differing stages of economic development
requiring deep local relationships to source off-
and market cycles, provide clear choices in terms of
market transactions or financing on good terms.
market and sector exposures. At any given point in
time, there are apparent cyclical shifts in demand
• There is considerable value in manager selection.
momentum, which allows for active lease management
In this regard, there is a critical requirement for
near-term. Meanwhile, forthcoming supply additions,
local operations and local staff. More so than North
which are often well-telegraphed two or more years in
America and Europe, fly-in / fly-out operations are
advance, permit genuine value-adding opportunities
simply not viable in Asian markets, particularly given
from market, sub-market and sector selection.
significant differences in language, culture and
business norms. Moreover, the set of investment
• Market inefficiencies provide scope for arbitrage.
managers in Asia is considerably thinner than other
While market transparency measures are improving
major regions, especially those with an established
broadly across the region, there remains some
track record of performance and delivering returns.
market inefficiencies that provide persistent
Figure 15: Historically, APAC markets have delivered Figure 16: Returns diverged in downturns, reflecting
higher returns with lower volatility market / asset / manager selection
Historical risks and returns (10 years to 2017) Asia Pacific total returns (quartile range, USD)
10% 20%
Top quartile of returns
China
15
Australia
8 Canada
New Zealand
S. Korea 10
Taiwan North UK
Annual returns
Singapore America
Asia Pacific
6 5
France US
Germany Europe
0
Netherlands Average
4
-5
Italy Japan
Bottom quartile of returns
-10
2
0 3 6 9 12 2007 2009 2011 2013 2015 2017
Standard deviation (%)
Source: MSCI IPD, BlackRock (January 2019) Source: MSCI IPD, BlackRock (January 2019)
MSCI annual index. The figures relate to past MSCI annual index. The figures relate to past
performance. Past performance is not a reliable performance. Past performance is not a reliable
indicator of current or future results. Indexes are indicator of current or future results. Indexes are
unmanaged and does not reflect fees. It is not unmanaged and does not reflect fees. It is not
possible to invest directly in an index. possible to invest directly in an index.
28 A SIA PACIF IC R E A L E STAT E
MKTG0219A-668707-2292648What are the risks to Chongqing, Nanjing, Wuhan and Xi’an. Tokyo
and Seoul face very specific supply pressures, for
the outlook? premium CBD office stock and industrial space
more broadly. Ultimately, these risks plays out on
All markets carry risk and this region is no different.
occupancy and rental incomes. For core investors,
What are the risks to the APAC regional outlook
securing long-dated occupancy is a critical pre-
ahead? What could go wrong? What strategies and
condition of entry into well-supplied markets. At the
opportunities may arise as a result?
same time, value-add investors may draw additional
• Further escalation in the US-China trade dispute will entry discounts in markets with looming supply,
have broad regional impacts, dampening Chinese but only if there is a viable active leasing strategy to
exports to the United States in 2019. Announced restore occupancy.
measures affect $250 billion of Chinese exports
and will likely reduce growth in China by 0.3%. This • Meanwhile, the fortunes of the global economy
comes at a time of ongoing restructuring in China, remain a factor for the outlook. The US economy
as activity shifts from manufacturing to services and is tracking strongly for now, but there are risks
from rust-belt to coastal service hubs. More broadly, from rising funding costs. Large and widening
lost manufacturing production in China will likely US fiscal deficits (FY19: US$900 billion, FY20:
divert to other Asian manufacturers (rather than US $1 trillion)29 are adding to near-term activity, but
the US), potentially adding to production in Japan, raises concerns about the capacity for counter-cyclical
South Korea and Singapore (for advanced goods) fiscal policy in the future. The eventual shape of the
and Vietnam, Malaysia and Indonesia (for more cost- Brexit arrangement is still uncertain, three months
sensitive production lines).28 ahead of the deadline. Mounting fiscal deficits and
rising populism in Italy are raising questions about
• Chinese corporate debt levels are elevated. Amidst ongoing stability of the broader Eurozone.
an ongoing round of financial sector reforms and
credit rationing, private non-financial debt ratios While there are legitimate risks to the regional outlook,
have peaked (167% of GDP in Q2 2016), before there are also sensationalised news headlines in the
trending down modestly since (164% of GDP in press as well. What common myths need debunking?
Q1 2018). The clampdown on shadow banking
• Are there ghost cities across China?
channels are re-routing borrowers into the official
Ordos City in Inner Mongolia was widely reported
system. Even so, both bank and non-bank credit
as a ghost city in 2009, funded by a coal mining
ratios are stabilising. Tighter credit availability will
boom and curtailed by a water shortage in a
add funding pressures for developers and landlords,
desert environment. The city planned for 300,000
providing a potential source of transactions. That
residents over a 20-year development timeframe.
said, these credit restrictions may ease in 2019 if
This city now has around 153,000 residents,
the economy slows and these capital constraints
with house prices up 50% since 2015. This is
become overly tight.
perhaps a poignant illustration of the pace of both
development supply and population-led demand
• Rapid supply gains present risks in spot markets.
in China and how infrastructure delays
In broad terms, Chinese office and retail markets
can have significant impacts on take-up in
face abundant supply, more so in Tier-2 cities like
greenfield developments.30
28 Source: ANZ Research, BlackRock (January 2019). 29 Source: US Congressional Budget Office
(August 2018), BlackRock (January 2019). 30 Source: Forbes (June 2017), BlackRock (January 2019).
O P P O RT U NI T I E S I N DY NAMI C MAR K ET S 29
MKTG0219A-668707-2292648• Is growth real in China? GDP measures are • Are there housing price bubbles in Asia? Buoyant
imperfect estimates of economic activity. In China, housing price gains have raised questions about
investors are uncertain if official statistics provide a housing affordability and the prospects of regional
fair representation on the state of the economy. For pricing bubbles. Certainly, price gains have been
this reason, analysts also review so-called Li indices aggressive given rising incomes and low interest
(named after index proponent Premier Li Keqiang) rates. However, bubbles do not deflate periodically;
which encompasses easily measurable indicators bubbles pop after a big and long run-up. In this
like electricity consumption, railway cargo freight context, there is modest price deflation underway in
and bank loans. For the record, these tangible Australia (2011-12, 2018) and Hong Kong (2018-19),
measures are broadly consistent with recent GDP following modest price falls in Singapore (2016-
figures and actually show some encouraging signs 17), China (2014-15, 2017-18) and Japan (2011-12).
of improvement in mid-2018. 31
Ultimately, small periodic price corrections are
healthy for sustaining affordability and reduce
the risk of a pricing bubble and a larger, more
disruptive correction.32
31 Source: Asia Times (July 2018), Bloomberg, St Louis Federal Reserve, BlackRock (January 2019).
32 Source: ABS, BIS, Bloomberg, HK Rating & Valuation Department, BlackRock (January 2019).
Important information
The opinions expressed are as of January 2019 and may change as subsequent conditions vary. The
information and opinions contained in this paper are derived from proprietary and nonproprietary sources
deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy.
As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors
and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock,
its officers, employees or agents. This paper may contain ‘forward-looking’ information that is not purely
historical in nature. Such information may include, among other things, projections, forecasts, estimates of
yields or returns, and proposed or expected portfolio composition. There is no guarantee that any forecasts
made will come to pass. Reliance upon information in this paper is at the sole discretion of the reader. Past
performance is no guarantee of future results.
Index Disclosures: Index returns are for illustrative purposes only and do not represent any actual fund
performance. Index performance returns do not reflect any management fees, transaction costs or
expenses. Indices are unmanaged and one cannot invest directly in an index
This material is provided for informational purposes only and does not constitute a solicitation in any
jurisdiction in which such solicitation is unlawful or to any person to whom it is unlawful.
In Hong Kong, this information is issued by BlackRock Asset Management North Asia Limited and has not
been reviewed by the Securities and Futures Commission of Hong Kong. This material is for distribution to
“Professional Investors” (as defined in the Securities and Futures Ordinance (Cap.571 of the laws of Hong
Kong)) and should not be relied upon by any other persons or redistributed to retail clients in Hong Kong.
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30 A SIA PACIF IC R E A L E STAT E
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