M&G Bullish on Japan Multi-Family Market, Aussie Student Beds and Sheds

M&G Real Estate remains bullish on Asia Pacific’s residential segments, with special mention to the Japanese multi-family market and Australian student accommodation, while the logistics sector Down Under also stands out as an investment priority for the global asset manager.

Rent growth in Japan multi-family, driven by the nation’s strongest wage increase in over three decades, continues to bolster a market distinguished by deep liquidity, a strong focus on yield and an emphasis on location and infrastructure, the property unit of London-listed insurer M&G said Friday.

M&G Real Estate, which manages more than $40.9 billion in assets worldwide, last year won a $250 million commitment from its parent group for APAC living sector investments. In October, M&G revealed its $68 million acquisition of a prime residential portfolio in Osaka under the APAC living strategy, boosting the firm’s exposure to the global residential sector to $7 billion.

“Residential real estate remains more resilient than commercial sectors, with inflation supporting rental growth,” M&G said. “Shorter lease cycles also allow investors to capture rising rents faster, enhancing the sector’s appeal.”

Fundamental Support

M&G’s Japan outlook comes as multi-family occupancy in Tokyo’s 23 wards has climbed to just over 97 percent — close to the pre-pandemic high and nearing a two-decade peak — according to a UBS report late last year, with the investment bank highlighting the growing prospects for rental growth driven by ongoing supply-demand imbalances and potential project delays.

Average rents in the capital’s 23 wards climbed 1.3 percent during the fourth quarter versus the prior three months and 6.4 percent year-on-year to reach JPY 4,332 ($29) per square metre, Savills said in a Tokyo residential leasing update. Average rents in the central five wards — namely Chiyoda, Chuo, Minato, Shibuya and Shinjuku — rose 2.2 percent on a quarterly basis and 6.7 percent year-on-year to JPY 5,250 per square metre.

“Net migration continues to hit new highs, while supply constraints for new for-sale condominiums should continue to shift some demand to the rental residential market, bolstering confidence in the sector for the year to come,” the consultancy said.

In Australia, the student housing space is attractive given low provision rates and muted short-term supply, said M&G, which earlier this month announced its acquisition of the 369-bed Park Avenue facility in Melbourne’s inner suburb of Parkville. The buy marked the fund manager’s first investment in Australia’s purpose-built student accommodation segment.

After almost doubling to more than 132,000 beds in the past decade, the PBSA market still serves just 6.5 percent of Australia’s full-time on-campus student population, according to data from the Property Council of Australia and consultancy Urbis.

“Our entry into Australia’s PBSA market reflects our confidence in the region’s long-term fundamentals and the significant investment opportunities it offers our clients,” said M&G Real Estate Asia CEO JD Lai.

Industrial Strength in Oz

M&G is also keen on the logistics sector in Australia, drawn to the market’s “exceptionally low” vacancy rates, rising yields and resilient valuations amid strong rental growth.

The firm underscored its commitment to the thesis last month when it disclosed a tie-up with Aussie developer Stockland. The deal gives M&G a 50 percent stake in Ingleburn Logistics Park, a warehouse campus in Sydney’s southwest suburbs with 123,551 square metres (1.3 million square feet) of gross lettable area.

Cushman & Wakefield expects investment volume in Australia’s industrial market to reach A$10 billion ($6.3 billion) in 2025, up 38 percent from last year’s level. Even then, volume would represent less than 4 percent of the country’s investable universe of industrial assets, many of which remain tightly held, the consultancy said in a market outlook.

New capital sources are expected to emerge from offshore in what is “shaping up to be a dynamic year” for the Aussie industrial market, according to Cushman & Wakefield.

“While this will include traditional dominant markets such as Singapore, Hong Kong and the US, capital inflows are expected to become more pronounced from Japanese and European-based capital, many of which have recently undertaken market and sector due diligence,” the consultancy said.