Asia as a continent is in a phase of radical economic progression. US real estate investors project that no part of the world offers the same kind of investment opportunities as the Asia-Pacific regions.
Countries from this region are becoming more open for collaboration and strengthened partnerships with US real estate investors, making it an excellent time to invest in Asia.
Asian investments provide a broader exposure to frontier markets like the Philippines and Indonesia, with a population of 103 million and 261 million, respectively. This duo has a population higher than the US and Europe put together.
A lot of Asia has entered an era of extraordinary urbanization. In less than 30 years, over 600 million people have moved from rural settlements into major towns and cities in China. Moreover, rural nations in Asia have grown to become close to 70% urbanized centers within a short time. In fact, between 2020 to 2025, it is projected that over 60% of the world’s population will live in urban areas.
In many mega regions, cities will merge to create urban settlements on a broader scale never seen in the history of the Asian continent. These new mergers will take the form of city-regions, urban corridors, and megaregions. For instance, before 2026, it is projected that Japan’s Tokyo Nagoya-Osaka-Kyoto-Kobe regions will have an estimated population of over 70 million.
The city region of Thailand, specifically Bangkok, is expected to experience a 200KM expansion from its current location. Compared to other developed nations in Asia, developing countries like Vietnam, the Philippines, Malaysia, and Indonesia will boost the continent’s young population. Structural shifts and economic growth increase household income in Asia and attract real estate investors from the US.
This is one of the major reasons why US real estate investors are ramping up Asian investments. The region has benefitted from megatrends through the openness of increased intra-continental business investments and activities. The presence of US real estate investors in Asia has been sporadically increasing, surpassing the number of US real estate investors in other regions of the world like Europe and North America.
According to the Fortune Global survey, Asian offices are an investment hub for top US real estate investors in 2021. The technological shift in boosting productivity further reveals the demand for top-notch real estate.
Asia is a region that provides the fastest economic growth globally compared to Europe and the United States. The real estate market in Asia offers different economic cycles as well as rental and pricing cycles.
Examples of value creation in Asia
- India — There are a lot of real estate opportunities in India. In terms of performance, India has underperformed compared to other Asian countries. But between 2020-2030, India is believed to be one of the hottest spots for real estate investment in Asia as a whole.
- China — Rapid growth experienced in the e-commerce sector plays a crucial role in the vast increase in the Chinese property market. There is great potential for investments in the logistic sectors also.
- Japan — Japan has had a rather stable economy for decades, and investment opportunities still exist in the economy’s residential sector. More opportunities exist for enhanced asset management of huge property portfolios (lower management fees and higher rents). The region attracts foreign investors with high return yields.
- Southeast Asia — Many countries in Southeast Asia have been showing prosperous growth throughout the years. From developed cities like Singapore to emerging countries such as Vietnam, the region is expected to play a huge part in the oncoming future and be a hot spot for investment.
Since 2015, US real estate investors have purchased over USD$20 billion worth of commercial real estate properties in Asia. This exponential increase in the rate of foreign real estate investment in Asia includes the purchase of apartment complexes, office condominiums, buildings, and warehouses.
US real estate investors reveal that their primary reason for ramping up Asian investments is that it’s more affordable and easily accessible than their home-based American cities like New York, Los Angeles, San Francisco, and Vancouver. Some also point to high-ranking companies like Starbucks, Amazon, and Microsoft in the region, making it well-known in the international real estate market cycle.
The property value appreciation potential is higher in Asia compared to other regions of the world. Asia represents the world’s topmost cross-border real estate investment hubs due to currency advantage. Over the last five years, the US dollar has depreciated by 1.5% compared to Asia’s regional currencies, which seem to be more sustained.
Continued growth in Asia
Asia as a continent represents one of the world’s best long-term structural growth hubs. In terms of real estate investment. Asia’s equity market has lots of positive reviews and can be summarized as follows:
- The rate of funds for returning to emerging markets is quite commendable. It is increasing in an exponential order.
- Valuations and growth in Asia are both compelling and robust, especially in China.
- The Asian real estate market has already begun 2019/2020 rebound on trade war de-escalation.