Living sectors are the new targets for yield-seeking investors and developers
JLL reveals why different life stages each represent investment opportunities across Asia Pacific
Investors and developers are eyeing the living sectors, an emerging group of residential real estate products, to place their capital. The sectors encompass real estate where people live throughout their life stages: student housing, co-living, multifamily, senior living and aged care.
JLL's latest report uncovers how rapid urbanisation is shifting how and where people live. But, dwellers' acceptance of the shared-economy is making the living sectors a successful alternative to traditional housing. This consistent demand is catching the eye of investors.
"We're seeing rising investor interest in the living sectors across major Asia Pacific cities because the demand for affordable, alternative housing options is intensifying," says Rohit Hemnani, COO and Head of Alternatives, Capital Markets, JLL Asia Pacific. "Investors in search of stronger yields, portfolio diversity and long-term holds should hedge their bets on these sectors now."
JLL's report found that investors can generate more consistent yields in the living sectors due to the non-discretionary nature of the asset classes. Top early opportunities identified for investors willing to venture out onto the risk spectrum and capitalise on healthy spreads include:
- With Mumbai's student housing benefiting from more than 34 million tertiary students across the country, the demand for this space is there. India's relatively untapped and in need of capital to gain traction and is expected to command yields between 10 and 12 per cent*.
- Aged care and senior living spaces are more culturally accepted in Australia than elsewhere in Asia. Due to higher life expectancy and more single-person elderly households, the need for these units is likely to continue to push development demand. Sydney is a growth market with yield estimates between 6 and 8 per cent*.
- Multifamily, an en-bloc apartment building, is one of the most stable sectors. The proportion of renters to home owners is expected to rise as house prices across major Asia Pacific markets have outpaced rents. Tokyo remains a top target for investors looking to get into a large, liquid market early with deal flow and favourable financing arrangements. The yield estimates between 3.5 and 4.5 per cent and the sector has very strong downside risk protection, and investors can achieve scale through portfolios.
- Young adults are opting for city living, reducing the need for traditional residential housing. Co-living has gained traction in Singapore and Hong Kong and is growing rapidly in Australia. Tokyo remains relatively untapped. The city's density bodes well for co-living, and yield estimates are between 4 and 5 per cent*.
"The return expectations for the living sectors vary greatly by city and category, but overall they are expected to outperform traditional residential properties," concluded Mr Hemnani. "There is plenty of opportunity for market penetration in the living sectors now. We expect that in five years there will be substantial portfolios across Asia Pacific, and in 10 years, significant levels of trading."
For more information, please download "The Living Sectors" report.
* All yields are JLL estimates *
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.
About JLL Thailand
The firm’s operation in Thailand began in 1990 and today is the country’s largest international property service provider with 1,600 employees and more than five million square metres of property and corporate facilities managed. In Euromoney Real Estate Survey 2018, JLL was voted as Thailand’s number one overall real estate advisor for the 8th consecutive year and also won top votes for agency/letting, research and valuation in the same survey. The firm was also named Thailand’s five-star winner in the commercial property consultancy and commercial real estate agency categories at the International Property Awards Asia Pacific 2019/2020. For more information, visit jll.co.th.