BlackRock: "Real Estate Investment Landscape Shifting... Japan and Australia Preferred Over Korea"

Hamish Macdonald, CIO of Asia-Pacific Real Estate Investment
"Traditional Strategies Ineffective Amid High Interest Rates and Inflation Volatility"

BlackRock, the world's largest asset manager, has stated that in the era of high interest rates and heightened volatility, traditional real estate investment methods are no longer effective. The company emphasized that proactive asset management and rental income growth will become the key drivers of returns. BlackRock also identified Japan, Singapore, and Australia as core investment markets in the Asia-Pacific region.

Hamis McDonald, Head of Real Estate Investment and Chief Investment Officer (CIO) for Asia-Pacific at BlackRock, presented this investment strategy and direction at a press conference on the 28th.

"Traditional investment approaches no longer work"... Proactive asset management is key to returns

Hamis McDonald, Head of Real Estate Investment and Chief Investment Officer (CIO) for Asia-Pacific at BlackRock, is presenting at a press conference held at BlackRock Asset Management in Jongno-gu, Seoul on the afternoon of the 28th. Photo by Yonhap News

CIO McDonald assessed that the investment environment has fundamentally changed since 2020. Before 2020, falling interest rates, low construction costs, and globalized supply chains formed the backdrop for asset price appreciation, which drove returns. However, since then, structurally higher capital costs and fragmented supply chains have shifted the focus, with McDonald stating, "In an environment of persistent inflation and macroeconomic volatility, proactive asset management has become the key to generating returns."

He noted, "The old method of chasing returns by compressing real estate capitalization rates is no longer effective." He added, "It is essential to continuously enhance income (rental yields) to maximize returns." He further emphasized the importance of properties with pricing power, stating that focus should be placed on supply-constrained assets where landlords can take the lead in determining rent levels. McDonald also clarified that they aim to avoid risks outside their scope of control such as development and construction, and that their principle is to approach mainly stabilized assets with low vacancy rates and strong rental demand.

Japan, Australia, and Singapore have low correlation with Western markets... Benefits of diversification

Haemishi Macdonald, Head and Chief Investment Officer (CIO) of BlackRock Asia-Pacific Real Estate Investment Division. Yonhap News Agency

CIO McDonald explained that, ahead of making investment decisions, "we look first at individual structural drivers such as population growth, inflow of capital and talent, and tourism demand, rather than just GDP." He then pointed to Japan, Australia, and Singapore, which offer liquidity and institutional transparency, as core investment destinations.

BlackRock, citing MSCI data as of the end of March 2026, stated, "Asia-Pacific markets show a relatively low correlation of returns compared to Western markets, providing diversification benefits." According to this data, the correlation coefficient of real estate returns in Japan with major Western markets is essentially zero or negative: the US (0.01), UK (0.05), and Canada (-0.18), indicating the strongest diversification effect. Australia (0.85 with the US) and Singapore (0.48) were comparatively higher, but each country's individual growth drivers stood out.

Japan has already surpassed pre-COVID-19 levels in terms of foreign tourist numbers. CIO McDonald stated, "The Japanese government is also actively promoting tourism with the goal of reaching 60 million visitors by 2030," as he unveiled an investment strategy focused on boutique hotels in key tourist destinations rather than large-scale hotels. He expressed a preference for "boutique hotels with 20 to 50 rooms, located in trendy (cool) areas where there are famous ramen shops and Instagrammable spots." Regarding other real estate markets in Japan, he evaluated, "Japan is the only place in the Asia-Pacific region with a significant multifamily market."

Explaining the phenomenon known as the "APAC lag," CIO McDonald cited Australia as a representative example, noting that developments seen in the US typically appear in the Asia-Pacific region with a time lag. He added, "BlackRock owns the fourth-largest self-storage platform in Australia and was the first in the industry to introduce automation, thereby increasing net operating income." Additionally, Australia is projected to have the steepest population growth index among OECD countries by 2030.

Korean market: "Attractive, but"... Domestic investors hold the advantage

Hemishi MacDonald, Head of Real Estate Investment and Chief Investment Officer (CIO) for BlackRock Asia-Pacific Region. Yonhap News Agency

On Korean real estate investment, BlackRock described it as an "attractive market" but maintained a degree of distance. He highlighted development-related risks and said, "Korea has a strong influence and advantage of domestic capital. The sector itself must be robust, and within that, we must find a path where we hold a competitive edge. That is our investment principle."

As for new growth sectors in Korea such as domestic data centers and single-family homes, he acknowledged, "Demand is clearly present," but said, "We believe there are still risks we have yet to fully identify," reaffirming a cautious stance. He added, "At BlackRock, we avoid investments that take on significant risks during the development process. We have not yet found an investment strategy in Korea that clearly offers growth potential and where we can secure a competitive advantage in terms of information."

When it comes to overseas real estate investments by Korean institutional investors, he noted a shift in focus from the US and Europe toward Asia is being observed.

Domestic institutional investors actively invested in overseas real estate such as the US and Europe around 2020, taking advantage of a low interest rate environment and ample liquidity. However, as interest rates rose and asset values adjusted, they have faced challenges.

Meanwhile, BlackRock is the world's largest asset manager, overseeing more than 14 trillion dollars (approx. 2,509 trillion won) in assets globally. Of this, alternative investments—spanning real estate, infrastructure, and private credit—amount to roughly 663 billion dollars (approx. 970.1 trillion won).

This content was produced with the assistance of AI translation services.