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1、ResearchAPAC|October Multifamily in motion:A deep dive into Asia Pacifics living sector Multifamily in motion:A deep dive into Asia Pacifics living sectorContents0102032Investment landscape The compelling case of multifamily investmentCapital Markets Japan Australia China(Shanghai)Conclusion Introdu
2、ctionThe living sector is currently the most active and liquid in the commercial real estate space globally.With USD 75 billion worth of trades in the first half of 2023,the sector has overtaken the dominance of office assets,which was the traditional stalwart of portfolios.Life after COVID,high int
3、erest rates,and the resilient fundamentals of the living sector globally have supported price discovery.Momentum continues to build.We record more capital making bids and allocations being made into housing,where supply hasnt kept up with demand.The living sector in Asia Pacific(APAC)is in its infan
4、cy.It is both segmented and set to evolve.This paper aims to examine residential units that have been purpose-built for the rental market in countries with institutional presence.In Japan,the term multifamily residential is used to describe the maturing segment thats attracted the most foreign capit
5、al in recent years.Similar living products are referred to as rental housing in Shanghai.In Australia and New Zealand,BTR,or build-to-rent,is the emerging asset class to watch.The distinction of BTR highlights the political and social aims of the nascent sector to key stakeholders.The categorisation
6、 fosters government support and encourages investment at scale where product has yet been built sufficiently to meet demand.In this report,we refer to multifamily,rental housing and BTR interchangeably.3Contents From a portfolio diversification standpoint,theres an increasing focus on favouring grow
7、th sectors.In H1 2023,APAC multifamily investment volumes reached USD 4 billion,increasing 2%yoy,against a 24%decline in total APAC volume over the same period.That activity has been led by Japan where portfolio deals previously fetched premiums from cross-border capital looking for exposure at scal
8、e.Chinas rise of single-family households coupled with strong policy support provides tailwinds behind its expanding investible universe.While transaction activity is still limited in Australia,offshore appetite can be seen from fundraising and site acquisitions.Operators are vying for market share
9、in collaboration with investors to develop and acquire assets.JapanChinaAustraliaAP others0246842000212022H1 2023USD bnMultifamily in motion:A deep dive into Asia Pacifics living sectorInvestment landscape01Figure 1.APAC multifamily investment volumes by geographySou
10、rce:JLL as at Q2 2023,including transactions USD 5 million,excluding land and entity-level deals4Contents LogisticsMultifamilyAll sectorsRetailHotelOffice0123456OfficeResidentialVacancy rate(%)024681012141618MelbourneTokyoOsakaMultifamily in motion:A deep dive into Asia Pacifics living sectorThe com
11、pelling case for multifamily investment1 Superior risk-adjusted return against other asset classes The risk-adjusted return of multifamily,measured by the Sharpe ratio,has performed better than most real estate sectors.This is attributable to stable rental income driven by structural tailwinds of a
12、growing urban population,exacerbating housing shortages and affordability.Figure 3.Vacancy rate volatility:office vs residentialFigure 2.Sharpe ratio by sector in JapanSource:JLL,ARES;using quarterly total returns from Q2 2008 to Q1 2023Source:SQM,ARES,JLL;based on vacancy from 2013 to H1 2023;each
13、box represents interquartile range defined as the difference between the 75th and 25th percentiles of the data and downside and upside lines outside the box refer to the minimum to the lower quartile(the start of the box)and from the upper quartile(the end of the box)to the maximum respectively2 Low
14、er variability around occupancy and expected rental income provides downside protection to a portfolio Inelastic occupier demand pushes downside risk lower.Take Australia,where the average residential vacancy rate in Melbourne is lower than office vacancy rates and with a narrower range.Occupier dem
15、and for multifamily is less sensitive to economic cycles.Low volatility around occupancy ensures stable rental income and offers downside protection for core investors.5Contents Multifamily in motion:A deep dive into Asia Pacifics living sectorFigure 4.Average WALE in Japan by asset typeFigure 5.Yie
16、ld spreads between multifamily and officeSource:JLLSource:JLL as at Q2 20233 Shorter weighted average lease expiry(WALE)can lead to better rental reversion,enhancing return profiles whilst offering effective inflation hedge Compared with the standard three-year lease for commercial properties across
17、 most of Asia,multifamily tenants usually commit to leases of one to two years.Especially when markets boast high occupancy levels(above 95%),a shorter lease term is preferred by landlords to capture upside rental growth more frequently,producing better returns and inflation protection.Take Japan,wh
18、ere the WALE of multifamily is the lowest among commercial properties.4 Multifamily investment commands a premium relative to office counterparts,demonstrated by yield analysis between sectors in the US and European markets Mature multifamily markets around the world transact at cap rates up to 180
19、bps below corresponding office cap rates.Recognising its low-risk nature,investors have shown willingness to offer a premium for multifamily assets relative to office assets.We expect this trend to repeat in Asia Pacific going forward,providing an impetus for further yield compression across the reg
20、ions multifamily markets.Shopping centreLogisticsPrime retailOfficeMultifamily0WALE24681012MultifamilyOfficeSpread(RHS)0%2.0%4.0%6.0%8.0%80-25-25-30-60-160-180-165Yield(%)TokyoParisLondonBerlinFrankfurtNew YorkSan FranciscoChicago6Contents Multifamily in motion:A deep dive into Asia Pacifics living
21、sectorCapital Markets02JapanMost international core investors in Japan are targeting around 7%to 9%internal rate of return(IRR).Cap rates have compressed over the past years which makes these returns more challenging to achieve.For forward purchases,the spread between forward sales and stabilised pr
22、oduct has hit a record low,down to as low as 25-35 bps over a stabilised cap rate,alongside high investor interest.That said,affordable debt financing with Japanese domestic banks coupled with high loan-to-value ratios(as much as 70%to 80%)could continue to enable investors to hit their targeted val
23、ue-add returns of 11%to 13%.Capital with a longer-term time horizon can look for yield upside by acquiring older assets(+20 years old)as these assets are discounted relative to newer product.Finally,development of Japanese multifamily is dominated by local builders.These groups often target a 10%gro
24、ss development margin.They dont solve to an IRR as they often wont hold for the long term,many selling their developments as forward purchases.International investors have long been keen Figure 6.Tokyo Grade A yield trend by sectorsSource:JLL as at Q2 2023on getting exposure to multifamily developme
25、nt in Japan,but often the top local developers have enough capital to proceed without them.The Japan market saw multifamily cap rate compression over the decade ending early 2023,when yields started to plateau.Domestic investors are not acquiring large portfolios but continue to pick up assets at th
26、e smaller end of the spectrum.The temporary pause in compressing cap rates is due to portfolio saturation.Once supply is absorbed,we expect yields to compress slightly again.Capital appreciation is going to stem from rent growth in the next two to three years.On a micro level,it will depend on how t
27、he property owner realises rent growth higher market rates can only be achieved with unit turnover.Japans residential leasing contracts operate on a two-year rolling term with often no rental upside until a tenant moves out.OfficeLogisticsMultifamily0.0%1.5%3.0%4.5%6.0%12/200712/200812/200912/201012
28、/201112/201212/201312/201412/201512/201612/201712/201812/201912/202012/202112/20227Contents Major policy changes affecting multifamily in Japan2017 The Japanese national government designed the“new housing safety net system”.Both local and national governments provide rental and repair subsidies to
29、residential owners who accept low-income earners,elderly people,and others who are easily refused by property owners as tenants.The City Planning Act was revised to establish a new“Countryside Residential Zone”.Stores and restaurants that support agriculture are allowed to be built.The Private Lodgi
30、ng Business Act was established to allow landlords to provide private lodging services.2019 The establishment of guidelines on real estate crowdfunding and announcing extension and expansion of tax incentive schemes for crowdfunding schemes.2020 Amendments to the Basic Act for Land is aimed to encou
31、rage transactions in land with unknown owners or abandoned land.Amendments to Act on Facilitation of Reconstruction of Condominiums,to provide financial incentives for rebuilding deteriorated condominiums.2021 A new basic plan for housing was released by the government.Its objectives were to increas
32、e the supply of quality housing for households with children and elderly people.A registration system for property management companies was established to ensure the proper operation of rental housing management businesses.2022 Implementation of an energy consumption law aimed at improving building
33、energy efficiency and promoting the labelling of energy efficiency performance.Expiration of The Productive Green Land Act terminated tax incentives on designated agricultural land.More land sites would be sold for residential purposes.Multifamily in motion:A deep dive into Asia Pacifics living sect
34、orA bifurcation between the leasing market and the investment market has been a prevailing theme across all property asset classes since Q4 2022.Whilst leasing market conditions remain firm,investment momentum has slowed,with a thinner pool of active buyers.In terms of pricing,as the size of investi
35、ble stock outstrips available capital,the bid-ask spread has increased modestly.Smaller portfolios and single properties are more liquid than larger-sized portfolios.In the longer term,we anticipate a higher risk-adjusted return for multifamily and a stable income profile to appeal to a broader rang
36、e of capital.This will attract new investors to the market.Beyond 2024,investor demand will likely outweigh the investible product in the pipeline.8Contents SWOT analysisNotable transaction analysisMultifamily in motion:A deep dive into Asia Pacifics living sectorStrengthsWeaknessesOpportunitiesThre
37、ats Sophisticated and mature market Steady cash flows with high occupancy Stable markets in major cities,including Tokyo,Osaka,Nagoya,and Fukuoka Strong liquidity from both domestic and overseas investors Limited rental upside due to the entrenched leasing structure of two-year rolling leases withou
38、t rental escalation Relatively lower yield owing to limited new supply,especially in Tokyo city centre Potential rental upside may be realised through the installation of fixed-term leasing contracts which allows rental escalation at contract renewal The replacement of older assets has the potential
39、 for enhanced cash flow Japan has a declining population,especially in some non-core markets which might hinder demand for living products.But cities like Tokyo continue to see positive net migration QuarterProjectCityPrice(USD mil)VendorPurchaserQ2 2023Arch Capital Tokyo Apts PortfolioTokyo195Unkno
40、wnArch CapitalQ2 2023Mitsui Multifamily PortfolioTokyo70Global Link ManagementMitsui&Co.Digital Asset ManagementQ1 2023JP Morgan Multifamily PortfolioNationwide421JP Morgan Asset ManagementAXA IM AltsQ3 2022Samty Multifamily PortfolioNationwide109SamtySamty Residential InvestmentQ2 2022Green HomesTo
41、kyo114Japan Pulp and Paper CompanyGoldman SachsQ1 2022Blackstone Multifamily PortfolioNationwide427BlackstoneM&G Real EstateQ1 2022Sekisui House Multifamily PortfolioTokyo127Sekisui HouseSekisui House REIT9Contents Multifamily in motion:A deep dive into Asia Pacifics living sectorMarket fundamentals
42、After reaching peak supply in 2018,multifamily construction starts in the big four cities(Tokyo,Osaka,Fukuoka,and Nagoya)pulled back owing to development financing challenges and COVID.Since then,supply trends have normalised around metropolitan areas.Sustained positive net migration and large amoun
43、ts of ageing rental housing will likely underpin a strong upcoming supply cycle.New stock will be most prevalent in suburbs or fringe locations,as urban core locations are limited by land parcels for new development.Japans multifamily market saw muted demand in the early pandemic days,plagued by out
44、flows.Tokyo saw white-collar workers relocate further from city centres where they could live in larger and more affordable spaces.The turnaround came in mid-2021 when migration back to city cores occurred,alongside reopening measures.This coincided with the return of international students and Figu
45、re 7.Japan major metro rental housing construction startsSource:Ministry of Land,Infrastructure,Transport and Tourism200002020212022020,00040,00060,00080,000100,000120,000No.of unitsTokyo 23 WardsNagoya Osaka Fukuoka 10Contents Multifamily in motion:A deep dive into
46、Asia Pacifics living sectorFigure 8.Japan multifamily occupancy ratesSource:ARESSource:ARESforeign professionals,all of which drove demand in the leasing market.Unlike some other cities,Fukuokas occupancy levels remained unscathed throughout the pandemic.Despite its smaller economy,the city has serv
47、ed as an economic powerhouse,attracting younger people seeking best-in-class vocational and educational experiences.Rental performance between 2020 and 2022 was lacklustre,growing less than 1%annually across markets.Recovery in occupancy quickly normalised to pre-pandemic levels,particularly in Toky
48、o and Osaka.In 2023 and 2024,rents are expected to outperform the pre-pandemic five-year CAGR(2014-2019)by 0.5%.Nagoya has been a laggard among major markets since 2020.The city will likely see slower rental growth compared to other cities in the near future.Figure 9.Japan multifamily rental growth(
49、indexed to 100 at 2011)92949698610801/201101/201201/201301/201401/201501/201601/201701/201801/201901/202001/202101/2022Tokyo 23 WardsTokyo Metropolitan AreaNagoyaOsakaFukuoka Tokyo 23 WardsTokyo Metropolitan AreaNagoyaOsakaFukuoka 93%94%95%96%97%98%99%01/201101/201201/201301/201401/201501
50、/201601/201701/201801/201901/202001/202101/202201/202311Contents Multifamily in motion:A deep dive into Asia Pacifics living sectorAustraliaAustralia has recently come to the forefront with BTR development opportunities,attracting both local and offshore specialists.However,groups have generally bee
51、n pursuing a build-to-core approach.The weight of capital looking for BTR assets in a very early phase of development means investors have had to accept relatively thin development margins to source investment opportunities.Fund managers such as Lendlease,Mirvac,Hines,and Greystar are leading this b
52、uild-to-core strategy,focusing particularly on Victoria and Queensland where around 82%of Australia BTR pipeline is currently concentrated.Many completed projects have outperformed initial underwriting assumptions in terms of lease-up velocity,occupancy,and rental growth.Positive news came for forei
53、gn investors with the Federal Government in its May budget deciding to lower the withholding tax on investments in a managed investment trust(MIT)from 30%to 15%.At the same time the rate of tax depreciation on eligible BTR projects was also increased from 2.5%to 4%.With governments under intense pre
54、ssure to do more to address widespread housing supply issues across Australia,we expect more tax and planning initiatives will be introduced to support the growth of the sector.There has been general market uncertainty and increases in cost of debt,but compared to other asset classes,we havent seen
55、the hypothetical yield expansion for BTR.The current housing crisis in Australia has led to robust rental growth and record low vacancy rates,which are the primary drivers of gross revenue for BTR.This has strengthened the investment case,resulting in increased interest and liquidity.12Contents Mult
56、ifamily in motion:A deep dive into Asia Pacifics living sectorInvestment market updateThere is not yet an actively traded investment market for stabilised BTR assets in Australia.Despite the limited size of the market,capital raising activity has been strong.JLL estimates that in the order of USD 6.
57、5 billion of equity has been raised by major operators for Australian BTR strategies to date,while there are also several active capital raisings underway at present.This capital is focused on develop-to-core strategies with some one-off project transactions.Activity in the BTR and broader living se
58、ctors has been considerable.Since the beginning of the year,there have been several major BTR transactions.These include the Lendlease and QuadReal joint venture partnership in Brisbane,the fund-through partnership between Lendlease and Daiwa House for AUD 650 million and the Mirvac BTR Venture that
59、 is raising AUD 1.8 billion to re-capitalise its portfolio of five completed or under-construction assets.We expect both transactional activity and capital raising activity in the sector to accelerate in 2024 as:1)developments start to reach completion and stabilise;and 2)investors continue to becom
60、e more comfortable with underwriting investments in the sector and as the interest rate cycle reaches its peak.Furthermore,we expect further clarity will emerge on the Federal Governments decision to reduce the withholding tax rates for foreign investors in MITs from 30%to 15%,which will allow inves
61、tors to factor this change into the underwriting considerations.It is expected that more fund-through deals will emerge in Australia over the next 12 months.BTR development applications have surged.A number of these groups have already flagged or are likely to look for a fund-through transaction,whi
62、ch will allow them to capitalise on the current strong case for BTR development and earn a development management fee.For major BTR platforms,it could also achieve a desired result of eliminating some of development risks.13Contents Multifamily in motion:A deep dive into Asia Pacifics living sectorC
63、ase study:Australias largest BTR fund-through transactionPurchaserDaiwa HouseDeveloper/ManagerLendleasePurchase Price AUD 650 millionInterest Acquired75%Number of Apartments797 apartmentsIn June 2023,Lendlease entered into a joint venture partnership with Daiwa House to fund the development of Melbo
64、urne Quarter West,a 797-apartment BTR project located in the Melbourne Quarter precinct.Melbourne Quarter West is located on the edge of the Melbourne CBD and will be Australias largest purpose-built BTR project upon completion.The transaction was structured on a fund-through basis with Daiwa House
65、acquiring a 75%interest and Lendlease retaining a 25%interest.Lendlease will act as the development manager,investment manager and operator.The Melbourne Quarter West transaction is significant in the context of the Australian BTR market.Its the largest BTR fund-through transaction to occur to date
66、and likely to be so for some time.It highlights the strong investor appetite for the sector from offshore capital and their optimistic views on the outlook for the sector.14Contents Multifamily in motion:A deep dive into Asia Pacifics living sectorMajor BTR PlatformsOperator/Investment ManagerCapita
67、lCurrent PipelineOperational(#of units)Home(Grocon)GIC,Daniel Grollo Group7 assets 2,869 units710 GreystarAPG,Ivanhoe Cambridge,Ilmarinen6 assets 2,787 units0LIV(Mirvac)CEFC,MEC5 assets 2,199 units805Super Housing Partnership(Assemble)Hesta6 assets 2,152 units0LendleaseQuadReal,Daiwa House3 assets 1
68、,808 units0AltisAustralian Super6 assets 1,795 units0GQ(Gurner/Qualitas)Unknown4 assets 1,579 units0Kinleaf(Sentinel)PGGM,Federated Hermes8 assets 1,511 units173Indi(Investa)Oxford Properties3 assets 1,370 units0Local(Macquarie)Asia Pacific Real Estate Partnership2 assets 883 units0HinesCadillac Fai
69、rview3 assets 789 units0NovusAliro,M&G Property4 assets 736 units015Contents Major policy changes affecting BTR in Australia2020 New South Wales enacted legislation to give a 50%land tax discount on eligible BTR projects commenced after 1 July 2020 and relief from foreign investor surcharges on both
70、 land tax and stamp duty for eligible BTR projects.2021 Victoria enacted legislation to give a 50%land tax discount on eligible BTR projects suitable for occupancy after 1 January 2021 and relief from the land tax absentee owner surcharge.South Australia introduces a 50%reduction in land tax on elig
71、ible BTR projects until 2040 and reductions on stamp duties surcharges if land is purchased for undertaking significant development.2023 In May,the Federal Budget announced two major BTR measures:i.A reduction in withholding tax from 30%to 15%on eligible fund payments from MIT investments to foreign
72、 investors(effective 1 July 2024)ii.An increase to rate of capital works tax deductions(depreciation)on eligible new BTR projects to 4%.Queensland and Western Australia both announce 50%reduction in land tax on eligible BTR projects.Queensland also announced exemptions from foreign land tax and stam
73、p duty surcharges.Multifamily in motion:A deep dive into Asia Pacifics living sectorSWOT analysisStrengthsWeaknessesOpportunitiesThreats Strong population growth Low vacancy and upcoming supply Completed stock is being embraced Investor interest is strong,particularly offshore investors after recent
74、 tax changes The market is small Stretched construction resources and rising costs Planning process does not fully aid BTR application and expedited approvals To provide better-quality rental space Governments at all levels are under pressure to help solve the housing shortage problem Potential rent
75、al control:Minor political parties are pushing policies in response to widespread displacement 16Contents Multifamily in motion:A deep dive into Asia Pacifics living sectorMarket fundamentalsMomentum in BTR is building after significant tax incentives made in May 2023.Government support for the sect
76、or has increased in the face of a nationwide rental crisis.Low rental vacancy,rapid escalation in rents and growing displacement of low-income earners from the housing market.Official estimates of Australias migration have now been revised up enormously over the last few years and now just under 1.5
77、 million people are expected over the next five years.Foreign student numbers have surged,largely driven by China.An estimated 40,000 additional Chinese students returned to Australia in 2023.Figure 10.Australian rental vacancy(%)by city2020 PeakJul-22Jul-231.61.31.00.50.62.11.60.02.04.06.0SydneyMel
78、bourneBrisbanePerthAdelaideCanberraGold Coast(Main)Figure 11.Two-bedroom apartment rents(Indexed,Mar-20=100)Source:SQM Research and JLL Valorem as at July 23Source:SQM Research and JLL Valorem as at July 23SydneyMelbourneBrisbaneAdelaidePerthCanberra7080900140150Mar-20May-20Jul-20Sep-20No
79、v-20Jan-21Mar-21May-21Jul-21Sep-21Nov-21Jan-22Mar-22May-22Jul-22Sep-22Nov-22Jan-23Mar-23May-23Jul-2317Contents Multifamily in motion:A deep dive into Asia Pacifics living sectorFigure 12.GDP and population growth(2022 2032)Source:Oxford Economics-1.0%-0.5%0.0%0.5%1.0%1.5%0.5%1.5%2.5%3.5%4.5%5.5%6.5%
80、7.5%Population GrowthGDP GrowthChinaJapanGermanyUKIndiaFranceCanadaSouth KoreaRussiaBrazilAustraliaSpainMexicoUSPopulation growth at 1.5%per annum over the next decade remains the main driver supporting economic growth.The concentration is around major centres in the East Coast,driven by professiona
81、l jobs growth.As such,Australias major cities generally have an even stronger population growth outlook than the national outlook,which is very attractive to investors.The number of new BTR development applications lodged in 2023 has grown enormously.In our estimate,the total pipeline has increased
82、by around 53%over the first half of 2023.It is important to recognise that this pipeline is still moderate.Australia has typically built in excess of 50,000 apartments per annum.As such,even if every proposed BTR apartment in the pipeline between 2023 and 2028 is built,it still only translates to ar
83、ound 10%of typical apartment supply over this period.This is against a backdrop of an environment where build-to-sell(BTS)apartments development is around 40-50%lower than recent peak levels,so BTR is not at a scale yet where it is making much difference to Australias broader housing supply shortage
84、s.The number of projects in various stages of planning has also increased considerably in 2023.Part of the increase reflects the current attractiveness of BTR relative to traditional BTS projects in a difficult development environment.Long selling periods(particularly for larger BTS projects)are hig
85、hly detrimental in a market where construction resources remain stretched and finance costs are uncertain,which leaves developers very vulnerable to any rise in a projects cost base.Not only do BTR projects have the benefit of no selling period,but project revenues are rising in a market of strong r
86、ental growth and this is supporting project feasibilities.18Contents Multifamily in motion:A deep dive into Asia Pacifics living sectorFigure 13.National BTR supply pipelineSource:JLL as at August 23Source:JLL as at August 23Key BTR Stats(as at Aug 2023):4,340 units operational 8,823 units under con
87、struction 6,862 units plans approved 15,701 units in planning Future pipeline grown53%in 2023 YTD Pipeline=31,386 units Pipeline+Operational=35,726 unitsFigure 14.Pipeline by state 2,0003,0004,0005,0006,0007,0008,000Number of apartmentsCompletedUnder ConstructionPlans ApprovedIn Planning01,000201820
88、022202320242025202620272028There remains very limited data on operational assets at this early stage.However,anecdotally most projects have been leasing up quickly at anywhere between 25 and 40 apartments per month.Some projects have experienced slower lease-up though.This has generally b
89、een luxury products entering the market with rents well above those of surrounding inferior BTS properties.For projects closer in line with average local rental levels the market acceptance has been very strong and they have been able to capitalise on the tight rental market.The few projects that ha
90、ve reached a stabilised occupancy level(UBSs Smith Collective on the Gold Coast,Sentinels Element 27 in Perth,Mirvacs Liv Anora in Sydney,Blackstones Realm Kangaroo Point and Arklifes Robertson Lane in Brisbane)have been able to capitalise on the strength of the rental market and all have been able
91、to lift rents strongly the last 12 months.58%Victoria24%Queensland14%New South Wales4%Other19Contents Multifamily in motion:A deep dive into Asia Pacifics living sectorChina ShanghaiShanghai is the hub for institutional multifamily investment in China,with stabilised yields ranging between 4.5%and 5
92、.5%.Foreign investors are more inclined towards value-add or opportunistic strategies seeking higher returns.Domestic capital sources,such as insurance companies,are mostly targeting cap rates around 5%,with some groups even comfortable below 5%.IRRs vary widely depending on the investment strategy.
93、Most international investors are solving to high-teens IRRs and some even preferring over 20%.Value-add opportunities in Shanghai can attract institutional international funds,offering IRRs anywhere between 15%and 20%.Domestic groups have a lower cost of capital and are looking for IRRs in the range
94、 of 8%to 12%.For development,local developers solve for a yield on cost 100-150 bps above stabilised multifamily yields.We estimate there to be long-term yield compression.In the short term,no yield compression has occurred because both domestic and international capital remain very conservative.In
95、the medium to long term,there is room for yield compression due to the favourable market fundamentals.We could see assets trade anywhere between 4%and 4.5%over time similar to other APAC markets.Figure 15.Cap rate expectations for rental housing investment in ChinaSource:JLL2021202320180%Expected re
96、turn%Percentage of investors(%)10%20%30%40%50%60%5.5%20Contents TransportationIndustrial ParkUtilitiesLogisticsHousingMultifamily in motion:A deep dive into Asia Pacifics living sectorFigure 16.C-REIT market capitalisation by asset typeSource:JLL as at August 2023Investment market updateMore investo
97、rs are increasing their asset allocation into multifamily.It has healthy fundamentals,policy support,and social rental housing backed C-REITs.Some fund managers cite the asset class as the only or remaining few sectors where they can still pool capital from LPs now.Investors exhibit a strong prefere
98、nce towards tier-1 cities of Shanghai,Beijing,Shenzhen and Guangzhou,but other investors will go further abroad(e.g.Hangzhou and Nanjing).C-REITs have been a big catalyst for the China multifamily investment market.Currently,C-REITs are restricted to investing in affordable housing projects only but
99、 this maybe expanded upon in the future.Securitisation of multifamily products would help boost overall market transparency.More importantly,C-REITs would attract capital looking for an exit option.21Contents Major policy changes affecting multifamily in China2018 The China Securities Regulatory Com
100、mission(CSRC)and the Ministry of Housing and Construction prioritised support for asset securitisation of rental housing projects in medium and large-sized cities and pilot cities using designated land to build rental housing projects The China Banking Regulatory Commission(CBRC)officially permitted
101、 insurance funds to invest in the rental housing market2019 Housing rent included in the scope of personal income tax special additional deduction Ministry of Finance stepped up support for rental housing development in designated pilot cities2020 The CSRC and the National Development and Reform Com
102、mission(NDRC)actively supported the establishment of pilot REITs on high-quality infrastructure projects Central authorities highlighted the need to pay greater attention to the construction of affordable rental housing across the nation2021 The General Office of the State Council indicated Chinas m
103、ission to accelerate development of the affordable rental housing market by use of different policies The CBRC guided banks and insurance institutions to increase support for affordable rental housing,promoted insurance funds to support the rental market,and promoted the launch of pilot REITs The Sh
104、anghai government unveiled 15 supportive policies covering aspects of land,taxes,and financing to support the development of its rental housing market Shanghai Housing Authority issued new supervisory measures for the rental housing market2022 Shanghai issued specific rules for the establishment and
105、 operation of affordable rental housing projects Affordable rental housing loans were no longer centrally managed like other types of real estate loans Successful launch of the first batch of publicly traded affordable rental housing REITs China Resources launched another rental housing REIT;Chao Li
106、,vice chairman of the CSRC,said that the scope of the pilot REITs should be further expanded to include market-oriented rental housing projectsMultifamily in motion:A deep dive into Asia Pacifics living sector22Contents Multifamily in motion:A deep dive into Asia Pacifics living sectorNotable transa
107、ction analysisQuarterProjectDistrictPrice(USD mil)VendorPurchaserQ2 2023Fenghui Rental Apartment ProjectJiading78KWGPingan Real EstateQ2 2023Lingfeng Rental Apartment ProjectJiading101KWGPingan Real EstateQ2 2023Juyuan BuildingJingan78Private SellerBrookfieldQ1 2023Xujiahui Rental Apartment ProjectX
108、uhui110GreenlandCCB TrustQ4 2022C&D Longting Phase 1Yangpu79Xiamen C&DLaSalleQ3 2022Jiayu YunjingYangpu185R&F/KWGBrookfield/HitoneQ2 2022Le Ville ResidenceJingan116YangoGuohua LifeQ2 2022Baoshan Rental Apartment ProjectBaoshan123GreenlandPingan Real EstateSWOT analysisStrengthsWeaknessesOpportunitie
109、sThreats Strong demographic trends and demand drivers Policy support from government Large market size Rental growth caps for affordable rental housing projects limit investment returns Non-state-owned enterprises(Non-SOEs)have difficulties in acquiring rental housing land Partnerships with local de
110、velopers and SOEs to develop and manage rental housing projects C-REITs pilot programme provides an alternative exit channel Diversified customer base demands for differentiated products Economies of scale enhance operating efficiencies Oversupply of large-scale SOE-backed rental housing projects23C
111、ontents Multifamily in motion:A deep dive into Asia Pacifics living sectorMarket fundamentalsOver the past few years,the rental housing sector in most tier-1 markets have been undergoing an exponential growth phase benefitting from the confluence of favourable demographic shifts,policy support,and h
112、ousing affordability challenges.These markets are now poised to further benefit from new supply of institutional grade products,diversifying demand source,and a wave of renters transitioning from build-to-sell into multifamily projects.JLL estimates that the total number of multifamily units managed
113、 by Chinas top 30 operators increased from 1.19 million units in 2021 to 1.25 million units in 2022,representing a net addition of approximately 60,000 units.The pandemic dragged down the pace of multifamily Figure 17.Total multifamily stock managed by top 30 operators in ChinaSource:CRIC,JLL analys
114、is;total multifamily stock displayed above represent the total number of units under management Million UnitsQ4 2021Q1 2022Q2 2022Q3 2022Q4 2022Q1 2023Q2 202311.151.21.251.31.35construction,but construction activity significantly picked up once the economy opened in 2023.Total units managed by the t
115、op 30 brands rose 82,000 units over the first half of 2023 alone,reaching 1.33 million units as the construction and supply of new multifamily projects accelerated.Most of the future supply will likely be concentrated around Yangtze River Delta region,Greater Bay Area,and Jing-Jin-Ji metropolitan re
116、gion.These clusters continue to serve as economic powerhouses of the nation,offering well-paying jobs to both white-collar and blue-collar workers.In turn,they will continue to attract people from rural areas and surrounding regions.Figure 18.Average occupancy rates of mature projects managed by top
117、 multifamily providersSource:Company annual reports,JLL analysis;occupancy rates displayed above represent the occupancy rate of mature projects(those operated for more than six months)managed by those multifamily providers50%60%70%80%90%100%Port ApartmentBig+YouthaGoyoo24Contents Multifamily in mot
118、ion:A deep dive into Asia Pacifics living sectorFigure 19.Shanghai multifamily stock in unitsSource:JLLShanghai has continuously delivered new supply over the past few years.A record high of nearly 40,000 multifamily units were added in the first half of 2023 alone.In fact,the markets overall multif
119、amily stock has nearly doubled within just two-and-a-half years,growing from 77,000 units at end-2020 to 157,000 in H1 2023.Location wise,most future supply will predominantly be centred around metro stations and transportation hubs.These hubs are well-connected to the central business district(CBD)
120、,decentralised business district(DBD)and even business parks located in the outlying areas of Shanghai.Specifically,most of this new supply will be situated outside of the Outer Ring Road at Pudong,Minhang,and Qingpu districts.This rapid growth of Shanghais multifamily stock will continue,with about
121、 210,000 units of new product expected to be delivered over the next two-and-a-half years.20,000040,00060,00080,000100,000120,000140,000160,000180,000200212022H1 202325Contents Existing multifamily stock by ring roads57%Beyond Outer Ring18%Between Middle and Outer Rings17%Between Inner an
122、d Middle Rings8%Within Inner RingMultifamily in motion:A deep dive into Asia Pacifics living sectorFigure 20.Shanghais existing multifamily stock by ring roadsSource:JLL26Contents Shanghais future multifamily supply by district(unit)Multifamily in motion:A deep dive into Asia Pacifics living sectorF
123、igure 21.Shanghai future multifamily supply by districtExisting StockNew supply of R2 multifamily(H2 2023-2025)New supply of R4 multifamily(H2 2023-2025)020,00040,00060,00080,000100,000120,000MinhangQingpuSongjiangBaoshanXuhuiJinganJiadingYangpuPutuoChangningFengxianHongkouHuangpuChongmingJinshanPud
124、ongSource:JLL27Contents Multifamily in motion:A deep dive into Asia Pacifics living sectorFigure 22.Shanghai occupancy trendSource:JLLFigure 23.Multifamily penetration rates Shanghai vs USFigure 24.Shanghai rental index(indexed to 100 at 2020)Source:JLLSource:JLL80%82%84%86%88%90%92%20021
125、2022H1 202320232023202520300%5%10%15%20%25%30%35%40%45%USShanghai94969860212022H1 2023Despite the recent uptick in units,supply has been absorbed quickly with overall occupancy levels hovering around 89%to 90%at present,a sign of strong underlying demand.Over the longer term,po
126、pulation migration,changing attitude towards family and marriage,and other demographic shifts will continue to serve as enduring driving forces underpinning future multifamily demand for Shanghai and other major Chinese cities.Over time,the market will see operators institutionalise the sector by de
127、livering enterprise-managed products.A greater degree of institutionalisation,evidenced in the US multifamily market,often leads to better acceptance of multifamily products among consumers.Institutional assets allow operators to tap into prospective tenants from individually owned condominiums or o
128、ther living alternatives.The multifamily market penetration rate in Shanghai is predicted to leap to 15%in 2030 from 5%in 2023.As Shanghai gains steam and other cities in China follow suit,the country is primed to become a leading multifamily market in APAC.After a mild rental correction in H2 2022,
129、the markets performance has recovered with rents reverting to 2021 peak levels in tandem with reviving demand.We expect rents to climb on the back of solid fundamentals and demographic tailwinds.Even amid a strong level of anticipated future supply,we forecast rental growth to stay within a range of
130、 3%to 5%.28Contents Driven by positive structural factors,the multifamily sector in Asia Pacific is currently experiencing a significant transformation.This shift is attracting investors,developers,and operators who aim to tap into growing demand for multifamily properties across the region.Simultan
131、eously,key multifamily investment markets in the region are poised for further evolution.The combination of a growing investible universe,the emergence of new core multifamily markets,a deepening capital pool,and a wider variety of investment products is positioning major multifamily markets in the
132、region to offer an extensive range of opportunities.Multifamily has already established itself as a proven investment thesis globally and has been at the forefront of deal activity in recent years.While Asia Pacific is still catching up to other parts of the world,it is set to make significant headw
133、ay within the coming decade,solidifying its position as an established market.Conclusion0329Contents Copyright Jones Lang Lasalle IP,Inc.2023This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed,which are inhe
134、rently unpredictable.It has been based on sources we believe to be reliable,but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete.Any views expressed in the report reflect our judgment at this date and are subject to c
135、hange without notice.Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements.Advice we give to clients in particular situations may differ from the views exp
136、ressed in this report.No investment or other business decisions should be made based solely on the views expressed in this report.About JLLFor over 200 years,JLL(NYSE:JLL),a leading global commercial real estate and investment management company,has helped clients buy,build,occupy,manage and invest
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141、.Jeffrey SunManager,APAC Capital Markets Research Koji NaitoDirector,Japan Capital Markets Research Pamela AmblerHead of Investor Intelligence,APAC Stanley Shih Analyst,Research Shanghai,China Leigh Warner Senior Director Research Australia Residential Sherril ShengDirector,Research Shanghai,China M
142、anabu TaniguchiSenior Director,Japan Research Luke ProkudaHead of Equity Advisory Australasia JLL Junya Wei Vice President Greater China Hotels&Hospitality Yuki Matsumoto Assistant Manager,Japan Research Sungmin Park,CFA,CAIADirector,APAC Capital Markets RRobert AndersonHead of Living,APAC Capital Markets Roddy Allan Chief Research Officer Asia Pacific