The Nascent New Economy in Asia Pacific Real Assets

The Asia Pacific ("APAC") region is an important engine of global economic growth. Its collective economy surpasses North America’s by 40% in size and it is home to 60% of the world’s population¹. The region's markets are experiencing diverse growth narratives as they undergo rapid economic transformations fueled by digitalization, innovation, and shifting demographics. Contributing between 50% - 65% of incremental global GDP growth (2023-2026)², APAC’s emerging markets are increasingly exercising greater global sway.

Over the last 10 years global investors have favored US markets as is evident in the composition of the MSCI Index. The index is heavily skewed, with 75% of its weight in the US, a 40-year high, despite the country accounting for only 4% of the global population and about 26% of global GDP in nominal terms. As investors seek growth opportunities, the APAC region is well-positioned to benefit from portfolio rebalancing efforts and increased investor focus.

From a real estate perspective, the APAC region remains substantially under-invested compared to the US and Europe specifically in the areas of “alternative” assets in the new economy. On a per capita basis, the region possesses only a tenth of the modern warehousing space, fifteenth of the digital infrastructure capacity, and less than a twentieth of the life sciences R&D space.³ Bridging this gap by just one-third of the levels seen in Europe and the US would necessitate trillions in capital investment, presenting a tremendous investment opportunity. This growth is driven not by business cycles, but by enduring long-term secular trends and a history of under-investment. New economy sectors like advanced logistics, digital infrastructure, education, multifamily/residential, and life sciences are all poised to benefit significantly.

Currently, the APAC real estate market is largely dominated by traditional residential and commercial property companies, with only a handful of firms concentrating on the region's new economy sectors. This contrasts sharply with the United States, where 45% of the listed real estate market capitalization is comprised of new economy market leaders. There is no APAC equivalent to ProLogis in logistics, Digital Reality or Equinix in data centers or Alexandria in Life Science given the nascent stage of the Asian markets. Building the next generation real estate companies in APAC focused on these real asset sectors presents a clear opportunity for investors. They stand to gain not only from asset appreciation, but more importantly from the long-term growth and development of best-in-class market leaders.

(1) United Nations World Population Prospects 2024
(2) IMF World Economic Outlook, October 2024
(3) Sources: Cushman & Wakefield reports (1H 2024), CBRE reports (2023), JLL reports (2022 & 2023), Rava Partners Analysis

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