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Shanghai, 9 January 2018 - A swath of blockbuster real estate deals hit the headlines in 2017. Hong Kong recorded the world's highest transaction for a single office block with the sale of The Center for US$5.2 billion; hotel conglomerate Accor acquired Australian Mantra Group's portfolio of serviced apartments for US$1.2 billion; and CapitaLand Investment Trust bought Singapore's Asia Square Tower 2 for US$1.5 billion.
Looking ahead, JLL research projects that Asia Pacific transaction volumes will grow five per cent to reach US$135 to US$140 billion in 2018, driven by continued momentum in core markets and increased interest in developing markets.
So what should real estate investors and occupiers look out for in 2018? JLL reveals some of the trends that will shape the year to come.
Institutional players targeted Indian real estate in several high-profile investments in 2017, with Singapore's GIC purchasing a 33 per cent stake in a unit of DLF Cyber City for US$1.4 billion. The real estate arm of global insurer Allianz also announced its partnership with India's Sharpoorji Pallonji Group to establish a fund worth US$500 million to target India's office market.
India will continue to be the top developing market for investors in 2018, says Dr Megan Walters, Head of Research, JLL Asia Pacific: "India's Tier 1 office and retail sectors are projected to show the highest total returns in 2018. We've seen the end of the short-term disruption in India resulting from reforms such as demonetisation and the implementation of Goods & Services Tax. 2018 may be the year for investors to consider a strategic entry into India, given its positive long-term fundamentals and economic growth."
Meanwhile, Asian investors will continue to invest outside the region in 2018 due to the large amounts of capital that local markets are unable to absorb. Overall, investors from Asia spent more than US$26 billion on property in the US and Europe in the first three quarters of 2017.
Investors will seek opportunities in the alternative real estate sector such as aged care/senior housing, student housing, education, data centres, and self-storage facilities, to diversify their portfolios, and for long-term growth.
"We're observing growing interest and a huge opportunity for alternatives real estate. Demand in these sectors clearly outweighs supply, and the demographic demand drivers in the region are growing quickly. Yields on self-storage facilities are attractive compared to other traditional asset classes, ranging from five to seven per cent in Tokyo and Singapore, five to eight per cent for Australia, and around eight percent in China and India," says Dr Walters.
Proptech – the convergence of property and technology – is the latest disruptor in real estate and is likely to pick up steam in 2018. Asia Pacific proptech startups have alreadyreceived 60 per cent (US$4.8 billion) of the US$7.8 billion raised by global proptech start-ups from 2013 to 2017.
Jeremy Sheldon, Managing Director, Markets and Integrated Portfolio Services, JLL Asia Pacific, says: "In the long-term, digitisation of services, Internet of Things (IOT) adoption and automation will have a significant impact on corporate real estate strategy, team structures and processes. The introduction of IoT – smart systems and devices operating over a network – will drive greater transparency of real estate portfolio utilisation and performance. Smart buildings will help both building owners and occupiers improve performance and save costs."
While managing costs remains a priority for most businesses, so is access to talent. With organisations using the workplace to boost employee engagement and attract and retain talent, there will be a continued rise in companies using co-working spaces in 2018. Those that offer high-tech, personalised and innovative space offerings – such as collaborative workspaces, food and beverage, gyms and wellness areas – that create a
human-centric experience will stand out and attract the best in the war for talent.
"The shift to creating a holistic user experience is beginning to transform office space. The workspace of the future is one that can meet employee needs, while driving effectiveness and engagement levels," says Mr Sheldon.
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JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $145 billion. At the end of the third quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of over 80,000. As of September 30, 2017, LaSalle Investment Management had $59.0 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
JLL has over 50 years of experience in Asia Pacific, with 36,900 employees operating in 96 offices in 16 countries across the region. The firm won the ‘World’s Best’ and ‘Best in Asia Pacific’ International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the sixth consecutive year by Real Capital Analytics. www.jll.com/asiapacific
In Greater China, the firm was named ‘Best Property Consultancy in China’ at the International Property Awards Asia Pacific 2016, and has more than 2,200 professionals and 14,000 on-site staff providing quality real estate advice and services in over 80 cities across the country. www.joneslanglasalle.com.cn
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