Investors eyeing Asia Pacific corporate sale and leaseback opportunities as owners look to unlock capital
JLL is seeing increasing demand by corporates to release capital from their real estate portfolio
Record amounts of dry powder capital and investment appetite for stable and income-producing assets will continue to fuel demand for corporate sale and leaseback activity
SINGAPORE, 30 April 2020 – A surge in sale and leaseback transactions is expected across Asia Pacific in the second half of 2020 as owners look to unlock fixed capital and generate cash flow, says JLL. The impact of the COVID-19 pandemic is already leading to a notable rise in corporate real estate divestment opportunities as owners look to solidify liquidity positions and maximize working capital, and investors actively examine re-entry opportunities to deploy capital through sale and leaseback transactions.
“Corporate owners and occupiers are actively seeking new sources of liquidity and greater flexibility across their real estate portfolios. As many continue to re-evaluate their business models and look to maximize working capital during this time of uncertainty, real estate is viewed through a different lens, whereby it can provide both a source of immediate cash flow and tenancy flexibility. Hence, corporate sale and leasebacks are likely to play a significant role in the market's recovery and stability,” says Jeremy Sheldon, Head of Markets, Asia Pacific, JLL.
Sales of corporate-owned real estate in Asia Pacific average approximately $17 billion per annum over the past five years, according to Real Capital Analytics. Specifically, in Asia Pacific, sale and leaseback inquiries related to assets and portfolios in Asia Pacific has picked up significantly. Since early April, inquiries have spiked with corporates owners from various sectors such as automotive, electronics, media, retail and technology, across a diverse range of markets, including Australia, Greater China, Japan, Korea and Singapore, actively exploring sale and leaseback options with JLL.
Similarly, investors are increasingly looking to corporate sale and leaseback transactions as an attractive re-entry point to Asia Pacific real estate. Pre-COVID-19, target allocations to Asia Pacific real estate rose consistently over the past years. Approximately $40 billion in dry powder capital is ready to be deployed into Asia Pacific real estate, according to JLL’s Asia Pacific Capital Tracker Q1 2020.
With the onset of the COVID-19 and throughout the first stages of recovery, most investors are operating via cautious deployment strategies, even as they seek to expand their exposure to Asia Pacific real estate. Investors now favor lower leverage, diversification across geographies and asset classes, including alternative sectors, and most importantly, stable and income-generating assets. This clear preference for lower risk, core and income-generating assets is likely to support growth in the regional corporate sale and leaseback market into the second half of 2020 and through 2021.
“Despite broad economic uncertainty, investors have remained both calm and optimistic throughout the current environment. While cautious, our conversations with investors indicate that some are looking to increase their target allocations to take advantage of any dislocation. Increasingly, these market re-entry conversations have pivoted towards corporate sale and leaseback opportunities, a major theme already emerging in the broader global investment and occupier markets,” says Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL.
According to JLL, corporate sale and leasebacks remain at a more nascent stage in Asia Pacific, but throughout the COVID-19 pandemic, have been identified by both investors and corporate owners as a potential focal point in post-crisis real estate strategies. However, each situation, for both investors and corporate owners/occupiers, remain unique, requiring advisory across capital markets, leasing, workplace, property and facilities management, and project management.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion, operations in over 80 countries and a global workforce of more than 94,000 as of March 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.