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 management firm, emphasized that traditional real estate investment strategies are no longer effective in today’s era of high interest rates and high volatility. The firm stated that proactive asset management and rental income growth will now be the key drivers of returns. BlackRock also identified Japan, Singapore, and Australia as the core investment destinations in the Asia-Pacific region.

Hamish Macdonald, Head of Real Estate Investment and Chief Investment Officer (CIO) for BlackRock Asia-Pacific, shared this investment strategy and outlook at a press conference on July 28.

"Traditional Strategies No Longer Work"... Proactive Asset Management Is the Key to Generating 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 Macdonald diagnosed that the investment landscape has changed fundamentally since 2020. Before 2020, falling interest rates, low construction costs, and globalized supply chains fueled asset price increases and drove returns. Since then, however, fundamentally higher capital costs and fragmented supply chains have emerged. He said, "Amid persistent inflation and macroeconomic volatility, proactive asset management has become the core of generating returns."

He added, "The previous method of compressing capitalization rates to chase yields in real estate no longer works." He emphasized, "It is necessary to continuously grow income (rental returns) to maximize yields." Stressing the importance of properties with pricing power, he said that investment should focus on supply-constrained assets where landlords can take the lead in setting rents. He also noted the principle of avoiding risks outside the scope of control, including development and construction, and approaching mainly stabilized assets with low vacancy rates and healthy leasing demand.

Japan, Australia, Singapore: Low Correlation with Western Markets... Diversification Benefits

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

CIO Macdonald stated that before making investment decisions, "We look first at structural drivers such as population growth, capital and talent inflows, and tourism demand, rather than just GDP." He highlighted Japan, Australia, and Singapore as core investment destinations with ample liquidity and institutional transparency.

BlackRock, citing MSCI data (as of the end of March 2026), noted that "the Asia-Pacific market shows relatively low return correlations with Western markets, therefore offering diversification benefits." According to the data, the correlation coefficient for Japanese real estate returns with major Western markets — the United States (0.01), United Kingdom (0.05), and Canada (-0.18) — is effectively zero or negative, showing the most prominent diversification effect. Although Australia (0.85 with the U.S.) and Singapore (0.48) were relatively higher, each country had distinct growth drivers.

Japan's number of foreign tourists has surpassed pre-COVID-19 levels. CIO Macdonald explained, "The Japanese government is also aiming for 60 million tourists by 2030 as part of efforts to revive tourism," and described a boutique hotel investment strategy focused on areas with strong tourism demand, rather than large-scale hotels. He said his preference was for "boutique hotels of 20 to 30 rooms in cool neighborhoods with famous ramen restaurants and Instagrammable locations." Regarding other segments of the Japanese real estate market, he commented, "Japan is the only place in Asia-Pacific to have a multifamily market."

CIO Macdonald described the phenomenon of 'APAC lag,' citing Australia as a prime example. This refers to trends seen in the U.S. appearing in the Asia-Pacific region after a time lag. He said, "BlackRock owns the fourth-largest self-storage platform in Australia and was the first in the industry to introduce automation, which has pushed up net operating income." In addition, Australia was identified as the OECD country with the fastest projected population growth index through 2030.

Korean Market "Attractive, but"... Domestic Investors Have the Advantage

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

On investing in Korean real estate, he characterized Korea as "an attractive market," but maintained some distance. He mentioned risks associated with development and said, "Korea is heavily influenced by domestic capital, which holds the advantage," adding, "Our investment principle is that the sector itself must be strong, and within that, we must find pathways where we can secure a competitive edge."

Regarding new growth sectors such as domestic data centers and single-family housing, he acknowledged "clear demand" but also reiterated that "there are still risks we have yet to fully assess." He said, "BlackRock avoids investments that take on significant risk during the development stage," and "Although these areas have clear growth potential, we have not yet found an investment strategy in Korea where we can secure an information advantage."

As for Korean institutional investors’ overseas real estate investments, he observed that there is a shift in investment interest from the U.S. and Europe toward Asia.

Domestic institutional investors had actively invested in overseas real estate — in the U.S., Europe, and elsewhere — riding on the wave of low interest rates and ample liquidity around 2020. However, as interest rates have risen and asset values have been adjusted downward, these investors have faced challenges.

Meanwhile, BlackRock is the world's largest asset management firm, managing over 14 trillion dollars (approximately KRW 20,509 trillion) in assets globally. Of this, alternative investment assets across real estate, infrastructure, and private debt amount to about 663 billion dollars (approximately KRW 970.1 trillion).

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