BlackRock names Australia, Japan and Singapore as key Asia-Pacific real estate markets

"South Korea is one of the most attractive countries in the world. However, BlackRock only invests when it can secure a competitive edge in information and data in sectors with the strongest fundamentals — and we have yet to find that strategy in South Korea."

Hamish Macdonald, head and chief investment officer of BlackRock's Asia-Pacific real estate investment division, made the remarks Tuesday at a press briefing at BlackRock Asset Management's Seoul office in Yeouido.

BlackRock, the world's largest asset manager, identified Australia, Singapore and Japan as its core investment destinations in the Asia-Pacific real estate market. The firm said it views South Korea's real estate market as highly attractive but has yet to identify investment opportunities that align with its principles.

BlackRock's focus on the Asia-Pacific region is driven by the market's ample liquidity and high transparency. "Our value-add strategy is best positioned to maximize returns in markets with deep liquidity at the point of asset disposal," Macdonald said.

He said BlackRock runs a strategy that seeks value-add level returns while taking on only core-plus level risk.

Commercial real estate investment strategies are generally divided into four tiers: core, core-plus, value-add and opportunistic. The value-add approach involves enhancing an asset's value through renovation or change of use before selling it.

Macdonald said the Asia-Pacific region offers strong diversification benefits because its returns have a low correlation with those of Western markets. He also highlighted the region's low correlation with GDP growth as an additional strength.

BlackRock named Australia, Singapore and Japan as its primary investment targets in the Asia-Pacific region.

"The single most important macroeconomic variable driving real estate market growth is population growth," Macdonald said. "Australia has the highest projected population growth rate among OECD member countries."

He singled out Australia's self-storage market as a standout investment opportunity. "Self-storage has delivered the highest total returns and operating margins over the past 20 years, and it generates strong cash flow due to low capital expenditure and operating costs," he said. "Australia has a usage culture similar to that of the United States, but its penetration rate per capita is only one-third of the US level, leaving significant room for growth."

On Singapore, Macdonald said the city-state's steady inflows of population, capital and businesses were key attractions. "Singapore will continue to hold its current standing not only in the Asia-Pacific but also in global markets," he said.

For Japan, Macdonald cited tourism expansion as the primary investment driver. "The Japanese government and central bank are actively promoting the tourism industry, with a target of attracting 10 million tourists by 2030," he said. "Driven by this growth in visitor numbers, demand for hotels and other accommodation facilities continues to rise."

In Japan, BlackRock is focusing on boutique hotels and apartment hotels rather than large-scale properties. "Small hotels with 20 to 30 rooms face relatively less competition, lease up faster and can be sold at higher prices," Macdonald said.