Learn More: Why APAC Investors Maintain Faith In Alternative Sectors

Globally, real estate transactions have been subdued in 2023 given high anchor interest rates and damped economic prospects. However, several regions and industries have demonstrated remarkable economic flexibility in the face of global challenges, presenting attractive investment opportunities. Among them, the Asia-Pacific remains an attractive investment destination.

Asian Investors Find Real Estate Products Appealing  

In Q2/2023, according to MSCI Real Assets, Asia Pacific real estate transaction volumes decreased by -40% year-on-year (YoY) to USD$32.7 billion, however alternative sectors such as self-storage, data centres and R&D/life sciences assets attracted more than USD$8 billion of capital, putting them on track to match or even beat the total for 2022. 

Simon Smith, Head of Asia Pacific Research & Consultancy at Savills, says: “Investors are maintaining purchases of Asia Pacific alternative real estate sectors for several reasons. 

Sectors such as data centres and life sciences tap into global megatrends and so should grow despite the general downcycle in real estate. Alternative sectors tend to have a stronger operational element, which brings the opportunity for income alongside traditional rents. They are also in an early stage of development in many Asia Pacific nations, which means investors may be able to establish a dominant platform.” 

MSCI data show data centre acquisitions in H1/2023 nearly matched the total from 2022, while 2023 is set to be another strong year for the construction of new data centres, following two record years. 

Smith says: “Content creation, cloud computing and AI are generating huge quantities of data, which must be stored securely. Demand for data centres from hyperscalers such as Amazon and Microsoft, as well as homegrown players, will be substantial for the next few years. The investment market for stabilised data centres will grow as more are created.” 

In Q2/2023, office transactions fell by -56%, retail by -49%, and industrial volumes fell only -14%. Interestingly, investors are spending more on industrial real estate than they did before the Covid pandemic. 

Commenting on the investment potential of the Asian market, Smith emphasises: "There are still significant positives for the office sector in this region, where we are back in the office. Bricks-and-mortar retail has learned how to interact with online and is making a comeback with shoppers keen for experiences. Meanwhile, the region still needs more modern industrial and logistics space."  

Viet Nam Remains an Attractive Investment Destination  

According to Savills Prospects research, Japanese investors were the most active in H1/2023, with USD$2.5 billion in new investments, exceeding their previous record set in 2018 (USD$1.4 billion). Japan's investors have been buying in Southeast Asia and Australia. According to a report from the Foreign Investment Agency - Ministry of Planning and Investment (MPI), by August 2023, Japan was the third largest investment partner with a 14.2% share of total FDI, increasing by 73.1% YoY.  

In 8M/2023, foreign direct investment (FDI) in Viet Nam was positive at USD$18.15 billion, increasing by 8.2% YoY.  

There were 1,924 licenced projects with a total registered capital of more than USD$8.87 billion; projects increased by 69.5% YoY and capital rose by 39.7% YoY. Manufacturing and processing had the greatest newly registered capital at USD$13 billion, equal to a 67.8% share of the newly registered investment capital and increasing by 14.7% YoY.  

Matthew Powell, Director of Savills Ha Noi, shares: "FDI capital inflows reflect the opportunities Viet Nam presents, particularly in the manufacturing sector. Viet Nam is making great efforts to improve infrastructure by completing inter-provincial national highways and upgrading international airports, and deep-water ports. Infrastructure development, preferential investment policies, and administrative procedure reforms continue to draw in foreign enterprises. We are seeing increase interest in green industrial products. Several international and Vietnamese investors are planning to invest in high-tech solutions for industrial real estate to meet the increasing demand for green factories and high-value industries such as electronics, electrical equipment, and semiconductors. This will have a positive effect on the market, allowing it to develop in a greener and more sustainable direction.” 

Conclusion

To minimise risk when making investment decisions, especially during this time of uncertainty, enterprises should use a trusted advisor with a deep understanding of the local market.  

Savills Investment Department specialises in researching, sourcing, and securing sound investment opportunities for its clients. Contact us for more information.