Japanese investors shift focus to APAC’s alternative assets amidst high interest rate

Japanese investors are actively seeking higher returns within the Asia-Pacific region. 

Japanese investors are shifting their focus towards alternative asset classes amid global economic changes, with a pivot towards multifamily housing and logistics.

Alan Beebe, Chief Executive Officer of the Urban Land Institute (ULI) Asia Pacific, said that traditional investments like office spaces are becoming less favored globally, and this trend is reflected in the APAC region as well.

"It's really the alternative asset classes that are catching the eye of Japanese investors," he said, highlighting multifamily housing, logistics, and senior housing as key areas of interest, and citing insights from the ULI's annual report, 'Emerging Trends in Real Estate.'

According to Beebe, this shift in investment patterns is largely influenced by the global rise in interest rates, which has led to a cautious approach from institutional investors.

"A lot of capital is currently on the sidelines due to high interest rates," Beebe explained. This environment has catalyzed a trend towards more intra-Asian investment opportunities, as regional players look for viable options within the APAC landscape.

When questioned about the future implications of these trends, Beebe anticipated a continued focus on regional investment opportunities, especially in sectors outside of the traditional office space.

"Everybody is watching very closely in terms of where interest rates will trend," he noted, suggesting that the office sector, while under duress, still presents pockets of opportunity in certain parts of the region, particularly outside of China.

Beebe also discussed Singapore's role in the shifting intra-Asian real estate dynamics. Singapore, according to Beebe, benefits from several factors, including geopolitical shifts and de-risking strategies by foreign and Chinese companies.

As businesses diversify away from China, Singapore and other parts of the region are becoming natural beneficiaries. "There is also an increasing trend of relocating or expanding regional headquarters in Singapore," he added.