Emerging markets in Asia Pacific are being favored over established gateway cities as potential real estate investment destinations for next year, a real estate forecast published by the Urban Land Institute (ULI) and PwC has revealed. The findings show investors are now keen to adopt a ‘quest for yield’ mandate as opposed to a ‘flight to safety’ approach being used until last year.
According to the Emerging Trends in Real Estate Asia Pacific 2017 report, Bangalore and Mumbai have been picked as the top two markets for investment and development by the survey respondents. Manila and Ho Chi Minh are next in the list.
The respondents picked Bangalore because of the growing demand for commercial space by the business process outsourcing and IT industries. Improving infrastructure in Mumbai, including a major road and rail infrastructure program scheduled for completion before 2019, is also expected to create more investment opportunities.
With four emerging-market destinations featuring as the top choices, this year’s Investment Prospects survey shows a strong shift away from last year when core markets in Australia and Japan were the most favored.
Meanwhile Singapore has sunk to the near bottom of the rankings as it struggles with overcapacity, falling demand and a slump in its residential sector.
The results reflect “investors’ growing disenchantment over the prospects of sourcing available core assets in gateway cities,” the report added.
“It is also notable that several gateway cities are in the bottom of the list, indicating their declining popularity,” added KK So, Asia Pacific Real Estate Tax Leader at PwC. “Although demand for core assets in gateway markets remains strong, buyers are struggling to source investable assets at acceptable prices that deliver high returns. Increasingly, those returns are most evident in emerging market destinations. Last year’s survey showed a ‘flight to safety’ approach. This year’s results reflect a very different mandate – a ‘quest for yield’”.
The survey is based on the opinions of 604 real estate professionals, including investors, developers, property company representatives, lenders and brokers.