Urbanisation, rising home prices and government policies responding to these trends are driving rapid growth in multi-family real estate around Asia Pacific, according to two of the sector’s biggest investors.
Although a proliferation of multi-family investment deals in 2020 coincided with the COVID-19 pandemic, senior executives from US multi-family giant Greystar and Dutch pension fund manager APG see those events as the results of much longer-term trends.
Speaking at the Asia Multi-Family Investment Forum on Mingtiandi’s MTD TV on Thursday, Adam Pillay, who leads Greystar in the region, said of 2020’s deal surge: “What you saw in terms of the activity wasn’t necessarily driven by COVID, but probably a global phenomenon where you’re seeing more interest in gaining exposure to durable cash-flow streams, which multi-family has historically presented.”
Pillay, who is based in Sydney, was appearing on the programme with Graeme Torre, managing director and head of Asia Pacific real estate at APG, which is a primary backer of Greystar’s initiatives in the region, including projects in China, Japan and Australia.
Urbanisation and Sustainability
Weighing in from Hong Kong, APG’s Torre agreed that the multi-family story looks more secular than cyclical, encompassing demographic shifts, the rise of megacities, runaway home prices and sustainability concerns.
“Rented residential we think has got a very long runway ahead of it,” he said. “Certainly in this region because it’s starting out, but also because it just fits with the long-term theme of urbanisation, housing affordability and the environmental angle.”
In the interview, which is part of a series sponsored by Yardi, the guests noted that while build-to-rent has a longer history in the West, particularly in the US, the big Asian markets are catching up fast. Most of the recent multi-family action has taken place in Japan, but China and Australia have budding sectors as well.
“China has for a few years now had a policy of encouraging rented housing in urban areas,” Torre said. “A lot of that is to accommodate migrant workers coming in from other parts of the country into the city, so that cities can grow and have a range of ages and skills in their workforce.”
And while each market has its own particular circumstances, Pillay has spotted similar drivers across geographies.
“It usually starts with growing populations, typically the 20- to 35-year-olds that need to have a housing solution when they go to a big city for their first job,” he said. At the same time, supply side constraints drive up homeownership costs, making multi-family a key alternative.
APAC Learns to Rent
Policy changes in Asia Pacific markets are creating more opportunities for the multi-family sector to mature.
“I think governments have realised they need to broaden the housing options in their major cities,” Torre said. And from an investment perspective, multi-family offers dependable returns from an asset class that is quite liquid, he said.
But market players should bear in mind that an asset-light strategy, such as the WeWork-style approach taken by the Chinese rental apartment management platform Danke, is unlikely to pay off in the end, Pillay said.
“It’s difficult to make a business model work where you have a long-term lease liability and you try to take on shorter-term revenues,” he said.
You can watch the full interview above.
Warburg Pincus, Golden Union Up Next
Thursday’s interview with Greystar and Warburg Pincus was the lead session in Mingtiandi’s Asia Multi-Family Investment Forum, a five-part event that continues on Thursday 6 May with a spotlight interview with one of the most experienced executives in China’s rental residential sector.
Qiqi Zhang, a managing director with US private equity firm Warburg Pincus, will appear in the exclusive interview at 10am Hong Kong time, sharing insights with viewers from his experience managing ventures including Mofang Apartments, Weave Living and Nova Property Investment.
In the one-hour session, which is sponsored by Yardi, Zhang will be joined by Jessica Yu Minjun, chair of listed developer Shanghai Golden Union Investment, which specialises in urban regeneration and project repositioning.