The build-to-rent / multifamily sector in Asia Pacific, outside of Japan, remains nascent but is growing quickly in response to both cyclical and structural drivers. Near universal high costs to purchase residential dwellings is fuelling the need for more rental stock across the region.
In some markets, such as Australia, this is exacerbated by record levels of net immigration. Similarly, Hong Kong, China has seen recent strong growth in inbound movement of students and professionals.
In the region’s most mature market, Japan, high occupancy rates continue to support the sector; especially in Tokyo where an undersupply of serviced apartments and purpose-built houses remains an issue.
One of the main headwinds to the sector is the current high cost of construction. Although raw material prices are off their peak, they remain elevated while labour costs are still rising. This is likely to keep most markets in a state of undersupply in the near-term, which will support rental growth.
Long-term, the drivers for a greater amount of housing look almost assured as the region experiences a mix of population growth, increasing student numbers and population ageing, giving rise to the need for more diverse housing options to meet these differing needs.
The operational capacity of Asia Pacific’s data centre markets has now surpassed 10GW, with a further 3.9GW under construction and an additional 9.4GW in planning. Such numbers underscore the rapid growth of the sector within the region.
While the Chinese mainland, Japan, Australia and India are the region’s largest markets at over 1GW each, the fastest expansion is being seen in emerging markets, especially Malaysia which is forecast to experience 600% growth over the next five years. In terms of absolute capacity growth, more than 50% of current under-construction activity is in the Chinese mainland and India.
Despite such rapid growth, in relative terms Asia Pacific remains under-served given current total capacity is comparable to that of the U.S. though have a 10-times greater population base, suggesting headroom for further expansion.
Further sectoral tailwinds will come from the growth of AI, greater cloud computing and deployment of 5G networks together with government policy support. The challenge remains matching these growth requirements with suitable power and water networks to support the required expansion.