Investors in Asia-Pacific are increasingly favouring student housing, co-living, and serviced apartments, as growth in traditional sectors like offices and logistics slows, according to CBRE. These living sector assets which remain underinvested in the region offer better returns and serve as a hedge against inflation. Multi-family properties have become the top investment choice, surpassing offices and logistics. Global funds are targeting student accommodation in Hong Kong and Australia. With rental rates outpacing inflation and central banks expected to lower borrowing costs, the living sector presents significant opportunities especially in markets like Japan, Hong Kong, South Korea, and Singapore.
Investors in the Asia-Pacific region are increasingly focusing on student housing, co-living, and serviced apartments as top assets within the emerging living sector. These sectors are seen as underinvested but with strong potential to deliver better returns, particularly as traditional areas like offices and logistics see slower growth. Investors are also attracted to these assets as a hedge against inflation, with rising demand from expatriates and low home ownership rates strengthening market fundamentals.
Among the living sector assets, multi-family properties have emerged as the most preferred investment class this year, surpassing once-popular assets like industrial, logistics, and office properties. Global investment funds are also eyeing student accommodations, especially in markets like Hong Kong and Australia as attractive targets. The overall outlook for the living sector is improving partly due to expectations that global central banks will soon lower borrowing costs. The U.S. Federal Reserve is widely anticipated to cut its target rate by 25 basis points on 18th September, which would influence other markets, including Hong Kong, due to its linked exchange rate system.
This reduction in borrowing costs is likely to further support investment activity in the living sector. Despite its growing appeal, the emerging living sector in Asia-Pacific has historically been underrepresented in commercial real estate investment, accounting for just 6% of total volumes since 2019. This contrasts sharply with more mature markets, such as Europe, where the living sector makes up 27% of investments, and the U.S., where it constitutes 44%. CBRE emphasises that this gap highlights significant opportunities for investors to diversify into this sector.
Rental rates for housing have surged in several economies across the region, outpacing inflation and making these assets an effective long-term value hedge. Shorter lease tenures also enable more frequent rent adjustments. Japan leads the region in living sector investments, particularly in the multifamily segment, which offers higher yields compared to office properties. Hong Kong, South Korea, and Singapore also show strong potential due to rising rental demand driven by an influx of expatriates. Co-living options, including student housing and senior living, are attracting considerable investment in these markets.
Investors in the Asia-Pacific region are increasingly gravitating towards the emerging living sector, recognising its strong potential for higher returns and effective inflation hedges. This shift is driven by the underinvestment in student housing, co-living, and serviced apartments, alongside rising demand from expatriates and low home ownership rates. As traditional property investments see slower growth, the living sector's appeal is further bolstered by anticipated reductions in global borrowing costs, presenting significant opportunities for diversification and long-term value.
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