One of Asia’s biggest transactions in 2019 was announced in October when the German insurer Allianz Real Estate agreed to acquire a $1.22 billion, 82-asset multifamily residential portfolio in Japan from Blackstone. Wes Fuller, executive managing director of investment management at Greystar Real Estate Partners, expects rental housing to continue to be a dominant investment theme for Asia-Pacific next year.
PERE: What single biggest theme do you think will dominate the Asia fundraising space in 2020 and why?
Wes Fuller: A real and important trend is the continued urbanization in major cities in Asia, which will drive interest from a resident perspective for professional rental housing. There is an emerging interest from institutional capital to invest in rental housing in Asia and that trend will continue, certainly well not the next many years.
PERE: The rental housing sector in Asia is yet to reach significant scale. Why do you think that is the case?
WF: The reason it has not started in scale yet is because in markets like China and Australia, multifamily is still a development-led strategy. It is often hard to launch industries through development, so it is going to be a slower creation for the industry. The trend line will be a professionalization of rental housing from student housing to multifamily in major cities in Asia where it currently does not exist.
PERE: How do you reconcile the advantages of investing in a nascent, yet fundamentally growing sector, with the country-level and geopolitical and macroeconomic challenges that may deter investors from investing in China?
WF: The investors we are speaking to are usually already invested in the country in another real estate asset class and they are adding residential to the strategy. So, they have already got comfortable investing in that local jurisdiction. And most of those investors have also invested in rental housing in other parts of the world.
The government has also been supportive of the development of the multifamily industry. That has helped spur on the early stages of the forming, which has been very positive.
PERE: What type of investment strategies do you think will suit a rental housing strategy? Are country-focused funds the way forward for the sector instead of pan-Asia since we have not seen the latter in the market yet?
WF: I do believe a pan-regional residential fund will make sense in the future. But it is more difficult today because the industry is in different stages of maturity across different markets. Some countries are development-specific while others are acquisition specific.
If you had a pan-regional office strategy, on the other hand, you could acquire office assets in all markets in Asia. But that is not the case in the residential sector.