Asset

Allianz Real Estate targets China and Japan despite challenges | Asset owners

Allianz Real Estate remains committed to China and Japan, despite the government crackdown on the Chinese tech sector and the growing shortage of international staff in Japan.

Recent months have seen Beijing’s crackdown on China’s biggest tech companies that have risen to near-monopoly positions in the sector.

However, Danny Phuan, head of acquisitions, Asia Pacific and head of China, at Allianz Real Estate, the Allianz Group’s captive investment and asset manager, said Asian investor the changes would shift its office allocation away from specialist business parks, particularly those focused on technology and life sciences tenants.

He said the crackdown would create business opportunities for smaller tech players.

“Longer term, we see small and medium-sized tech companies thriving as a result. Our strategy remains intact, but in light of some political changes in China, we are looking more carefully at rental profiles,” he said.

LOGISTICS AT THE HEART

Phuan said a focus on logistics remains a mainstay of the company’s China strategy.

But he stressed the importance of finding assets powered by renewables, given the large energy needs of cold storage facilities.

“Some assets may not meet our requirements, but if there is a clear path [to improving] we would consider it,” he said, adding that for logistics without cold storage, energy consumption was less of an issue.

Allianz’ is one of many investors improving the quality of environmental performance of its assets in China through the use of green leases. In the two business parks it owns, the proportion of green leases increased from 8% to 25% during the year until the first quarter of 2022.

EXPANSION IN JAPAN

Since February, Allianz Real Estate has increased the size of its Tokyo-based local team in Japan from six to nine, and is looking to further expand its team. But the growing activity of international investors in Japan has increased competition for talent.

“There are a lot of international investors who [have arrived] in Japan, especially in the multi-family space, and are looking to hire good people locally,” Phuan said.

He added that the key combination of skills was experience in underwriting and asset management, a good understanding of the industry in Japan, an established local network, fluency in Japanese and English and work experience in an international company.

“It is particularly difficult to find those who have both a local network and [fluency] in English,” he said.

He also highlighted cultural challenges. “Traditional Japanese business culture is more top-down. It is especially [hard to find] younger staff – in their 30s and 40s – who are able to voice opinions and challenge me. I’m not [based locally]; they have to give me information on the ground,” he said.

Mary Power, principal consultant and head of the property research team at Jana Investment Advisors in Melbourne, said Asian investor that hiring good local talent was a prerequisite for asset owners expanding into Asia. “There is a strong demand for staff to open these offices. Real estate is a local game in many ways, people need to be able to see the flow of deals and build relationships on the ground,” she said.

SUPERLOAD

She said Australia’s super funds were a group of investors competing for talent in Japan and across Asia as mergers created larger funds, increasing the rationale for investing overseas.

“If you’re a growing fund, size is really a big issue: you can’t deploy all your money there; you have to be open to all regions,” she said, adding that a number of large super funds had recently opened new offices in the region.

Part of the challenge for all investors is attracting talent from asset managers and investment banks, but Power said it’s more difficult for super funds that are under pressure from regulators to cut fees.

“In the war for talent, there is no doubt that the right people have to be attracted to fund management, and there [is] often wage differentiation. Given the focus on fees, it’s difficult,” she said.

ESG

Phuan reiterated the importance of finding investment partners in the Greater Asia region that could match Allianz’s ESG focus, as well as an adequate long-term investment horizon. In practice, he said, suitable partners were likely to target similar long-term investment trends to Allianz, including urbanization, infrastructure and digitalization.

“A key joint venture partner should have the same kind of perspective in this regard, as well as [emphasising] element of sustainability,” he said.

¬ Haymarket Media Limited. All rights reserved.