The robust fundamentals underlying rental housing and hospitality businesses in some of Asia’s largest economies have made the region’s living and lodging sectors a top investment target post-pandemic, with that popularity unlikely to fade soon, according to executives from AB Capital Investment, Alyssa Partners, Greystar and Frasers Hospitality who spoke at Mingtiandi’s Hong Kong Forum on Tuesday. Watch the full recording>>
Shifting consumer trends in renting and lodging have bolstered demand in Asia’s living sector, with more guests opting for longer stays in bigger and better rooms at more accessible rates, Alan Kam, founder and CEO of AB Capital Investment, said in a panel discussion at the Mingtiandi Hong Kong Forum.
“People like to stay for slightly longer and in places just slightly larger. Apartment-hotels fit really well into these two trends,” Kam said “We also like lifestyle hotels, as this type of hotel is much nicer than a traditional business hotel – way more trendy – but the price is definitely not the five-star hotel price. So that’s why from a user perspective, these are getting more and more attractive.
In Japan, Kam said Asia’s largest economy has retained its allure for investors as the only developed market in the region currently delivering positive carry.
Japan’s Capital Tsunami
Despite an aging population and labour shortages, Kam told the more than 200 people who attended the Yardi-sponsored event that Japan’s hospitality industry is set to continue to attract more investment, thanks to the country’s robust tourism growth and a limited supply of new hotels.
Chester Foo Ren of Frasers Hospitality
“In the foreseeable long-term future, Japan will continue to enjoy positive carry. People are just very willing to allocate more money to Japan, and to Japan hotels, and we start to see more and more European investors start to be interested in the market,” he said. “From a user, visitor, and investor point of view, it’s just a very, very good market right now,” he added.
That upswing extends beyond the country’s hospitality market into long-term rental accommodation, according to Chedli Boujellabia, managing partner and CEO of Alyssa Partners.
Boujellabia, whose company oversees JPY 175 billion ($1.1 billion) in assets across Asia’s second-largest economy, pointed to favourable market conditions and strong fundamentals as supporting the growth of Japan’s multi-family residential sector.
“Relatively low homeownership with an increasing renter base… condo prices at an all-time high – there’s a constant mismatch between demand and supply. It’s really a combination of strong fundamentals and strong demand, good quality, great structure, liquidity – all that packaged with great financing makes a very strong investment thesis,” he explained.
Boujellabia’s firm demonstrated the appeal of that thesis last month, when it teamed up with Hong Kong’s Gaw Capital Partners to buy a portfolio of 29 Tokyo apartment buildings in a deal estimated to be valued at JPY 40 billion ($259 million).
Shift in China’s Housing Landscape
Charles Ma, managing director for China investments at Greystar, told the same panel that, in Asia’s largest economy, a growing slice of the population now prefer to rent their homes, with many urbanites delaying home purchases as part of a broader reset in thinking toward home ownership.
“Originally, renting was for people couldn’t afford to buy. Now you have people who are actually considering potentially selling their homes and moving to a rental lifestyle, for a better location, and more flexibility. So all those things make the living sector more attractive,” Ma said.
With housing prices no longer seen set on a permanently upward trajectory, many urban dwellers now see risks in rushing to buy a home, with renting providing a potentially more attractive alternative.
“More and more, we’re seeing domestic consumers that are shifting their living and lifestyle philosophies away from ‘I have to buy it right away’ to one where I can probably buy at home a couple of years down the line,” Ma added.
Joining Ma on stage, Chester Foo Ren Jie, investment head for North Asia at Frasers Hospitality noted that Frasers Hospitality still sees a mismatch between demand and available rental housing options in China as the population of young professionals in country’s tier-one cities continues to grow.
“We’ve been seeing that growing concentration of young professionals. Looking at tier-one cities, we are expecting that concentration to grow over the longer term and hence, they’re waiting for housing options,” he said. “This (rental housing) serves as a very attractive value proposition for people that are coming to tier-one cities like Shanghai or Shenzhen.
Frasers Hospitality one year ago entered Asia’s long-term rental residential sector through separate joint ventures with Tishman Speyer and Tokyo-based Alyssa Partners in China and Japan, which involved S$170 million (then $126.4 million) in build-to-rent homes, including 325 units in Shenzhen.
Flying to the Lion City in September
Mingtiandi’s North Asia Lodging and Living Investment panel was among eight sessions at the company’s Hong Kong Forum on Tuesday. The full-day event welcomed over 200 industry executives, with another 400 more joining online via Mingtiandi’s MTD TV video platform.
Additional topics covered in panel sessions and interviews were the future of the office, China investment opportunities, Hong Kong value-add strategies and more.
Following the Hong Kong event, Mingtiandi will be heading to the Lion City in September for its third annual Singapore Forum before turning to Japan for its first-ever Tokyo Forum in November.
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