Aviva Investors, the asset management arm of UK insurer Aviva, has predicted that Asia-Pacific real estate will outperform other regions during 2013.
In a research document called Inside Aviva Investors: View from the Investment Floor, the firm said the performance of Asia-Pacific real estate generally would “remain highly competitive in a global context.” In addition, despite certain countries seeing their economies contracting, the firm said Asia-Pacific was the only region, year to date, to have seen investment volumes return to 2006 levels.
The interest in Asia-Pacific real estate has remained strong among Asian investors but, importantly, the firm has noticed an uptick in interest from European and US investors. Aviva said this increase in demand was driven by a low cost of capital globally, coupled with superior growth in the region.
Although Aviva Investors noted that investors still had a preference for core, income-yielding properties in the short term, it noted that Asia-Pacific property offered attractive upside potential over the coming two to three years. Specifically, the firm said it had registered an increase in rents in the central business district of Hong Kong. “We believe it is a good time to consider value-added strategies in Hong Kong offices,” it added.
In Singapore, the firm said the occupiers market had improved and that vacancy rates were better in two consecutive quarters. “The city-country should see long-term, sustainable growth with supportive government policy, a transparent business and legal environment and relatively low cost of occupancy amongst global gateway cities.” Aviva said it favored cyclical opportunities in offices and long-term opportunities in nondiscretionary retail.
In Japan, Aviva said Tokyo remained attractive in the wake of last year’s earthquake rebuilding and the Bank of Japan’s efforts to push inflation out. Meanwhile, in Australia, the firm said it remained positive about the country’s real estate in the long term, despite some near-term market weakness. “We believe that pessimism stems mainly from the domestic market, while the country still sees healthy investment and interest from foreign investors.”
Aviva Investors invests in Asian real estate via an open-ended vehicle launched in 2008 called Aviva Investors Asian Pacific Property Fund and via its multi-manager platform.