China property growth strong
Australia's largest listed industrial property fund, Goodman Group, and the Canada Pension Plan Investment Board (CPPIB) have unveiled a $US500 million ($543 million) increase to their equity allocation to Goodman China Logistics Holding (GCLH), with $US400 million contributed by CPPIB and $US100 million by Goodman.
GCLH was formed in 2009 to invest in high-quality logistics properties in prime locations across mainland China. As of June 30, GCLH had invested in 17 logistics projects in seven Chinese markets including Shanghai, Beijing, Tianjin, Kunshan, Chengdu, Suzhou and Jiaxing. The portfolio has an occupancy rate of 98.2 per cent with a strong customer base.
Goodman's chief executive Greg Goodman said the increased equity allocation of $US500 million would help to fund the continued growth of the company's China platform through a number of identified development projects for high-quality logistics space in the major Chinese markets.
The increased investment comes as the Asian real estate markets stage a turnaround in growth expectations. Based on forward projects, ratings agency Moody's Investor Services revised the outlook on Japan's real estate industry from negative to stable.
In its latest report on the region, Moody's analysts said the change in the sector outlook reflected the appreciation in the values of commercial properties, and the increasing rents for new office buildings and stable rents for properties such as logistics, retail and residences.
The report said the outlook was stable for both Japanese real estate operating companies (J-REOCs) and Japanese real estate investment trusts (J-REITs). It considered the deleveraging by J-REOCs and Moody's expectation that the debt-to-equity ratios of J-REITs would improve over 12-18 months.
"Furthermore, because the supply for new office space is likely to remain limited for the next two to three years, especially for high-quality and earthquake-resistant buildings, demand for Japan's leasing market for newly constructed office space will be strong. Rental revenues from office space constitute more than 50 per cent of the top-line revenues of J-REITs and J-REOCs," the Moody's report said.
According to Paul Guest, the head of research and strategy, Asia Pacific at LaSalle Investment Management, there is a broad spectrum of capital targeting Asian real estate, with an ongoing structural shift by many Asian institutions into the sector, such as the region's pension funds and sovereign wealth funds.
"In addition, listed real estate has benefited from a variety of new equity raisings and private equity continues to see strong in-flows and active fund-raising," Mr Guest said.
"These shifts in capital allocation, both secular and cyclical, provide a constant, stable demand for institutional grade property across much of the region."