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Spencer Levy
When it comes to economic, industrial and, indeed, real estate variety, Asia is one of the most diverse and expansive regions we cover. The continent has some of the largest and most populous countries on Earth, and when you expand the lens to Australia and its neighbors – as those who cover the Asia-Pacific region often do – its variety is compelling and hard to define. On this episode, we'll try to unpack what the region looks like for investors with a roundtable of experienced leaders whose work crosses borders, oceans, asset types and more.
John Pattar
We're very thematic in how we approach the markets. So what we look at is what's driving growth. And, for us, there are some key themes playing out across the region.
Spencer Levy
That's John Pattar, Head of Asia-Pacific Real Estate for KKR, the global investment firm founded in 1976 with current assets of more than half $1 trillion under management worldwide. Based in Hong Kong, John covers the primary markets of the region – Japan, China, Australia, Korea, Hong Kong, Singapore and more – investing in real estate across the product spectrum.
David Cheong
All in all, when it comes to the key sectors that we're focused on, I think we're witnessing a lot of positive tailwind, which has been very helpful to our strategies.
Spencer Levy
And that's David Cheong, a KKR Managing Director who joined us from Taiwan but is based in Tokyo. David serves as a Co-Head of Acquisitions for KKR Asia real estate business, focusing primarily on Japan and Korea, and is part of a team that covers the wider region all the way Down Under. And to provide a broader perspective, we're also joined by one of our own capital markets leaders in that part of the world.
Greg Hyland
When you look at Asia-Pacific as a whole, it's a really diverse and dynamic opportunity set from both developed economies and developing economies.
Spencer Levy
Returning to the show, that's Greg Hyland, Head of CBRE's Asia-Pacific Capital Markets, who leads a team with about 600 professionals covering a range of disciplines and asset categories across the region. Coming up, we return to APAC, looking at Japan in particular, where return to office, among other things, is powering the real estate business in ways you might find surprising. And we seek the latest highlights and insights from this widely diversified region. I'm Spencer Levy, and that's right now on The Weekly Take.
Spencer Levy
Welcome to The Weekly Take. And this week we're going to Asia-Pacific to talk real estate with John Pattar. John, thanks for coming out.
John Pattar
Pleasure.
Spencer Levy
And then we have David Cheong. David, thank you for coming.
David Cheong
Thanks for having me.
Spencer Levy
And then our own Greg Hyland, who rejoins us after several years. And we're delighted to have you back, Greg.
Greg Hyland
Pleasure to be back, Spencer.
Spencer Levy
Great to have you. So let's get to an issue that is very, very important everywhere, but specifically here in the United States when we're talking about fundamentals in the office sector, return to office. We understand that fundamentals, particularly in Tokyo, particularly in Seoul, are much better than we've seen, generally speaking, here in the U.S., in the office sector in particular. So, Greg, what's your perspective on that?
Greg Hyland
I think we look at it a couple of ways, Spencer. I think culturally, the work from home phenomenon really didn't come to Japan or South Korea. And I think there's a couple of things that may drive that. Firstly, it's cultural. I think secondly, a lot of people live in smaller accommodation in those cities, they're very dense. So the ability to work from home, particularly if you've got family, is really quite a challenging, challenging issue. I think the third thing I think which really does drive is the public transportation system in these cities is very well developed. So it's getting around Tokyo, despite being the largest city in the world, is extremely efficient to get around. So it's, as some people do live far away, but generally speaking, getting to the office is relatively efficient. So I think those structural things and then the cultural base, which I mentioned earlier, were really big drivers for office occupancy.
David Cheong
Well, I just want to add one thing, access to labor, actually in both Korea and Japan is quite limited. Right. So what we saw during Covid in our own office assets was, corporate actually investing behind corporate real estate to create more amenity areas, create more space for employees to really make it a more enjoyable workplace and investing behind real estate. So we saw the occupancy rate tick up. More and more companies are building amenity spaces, which is another support behind the growth in the demand.
John Pattar
Yeah. I think two points to add is, one, is, there is a degree of flexibility in Japan. There is a little bit more flexibility that if you do need to sort of work from home for various reasons, it's not frowned upon in the same way. But, I do feel that Greg's made the right points – that it's just culturally. And I think people forget that city centers are fun. That's where people go for a lot of entertainment. There's an assumption that it's a chore to go into the office, but actually, there's an awful lot of fun in downtown city centers. So I think that element of being able to train staff and people benefit from that. Young people do want mentorship, and they do want to see that interaction with their colleagues in work, as well as out of work in the city centers. And finally, I think David's touched on something very critical. There is a growth and need for very high credential offices following good ESG principles. There is no doubt that you get a premium on offices that have got those qualities and particularly air quality, given what happened with Covid. Spacing, the ability to have breakout rooms. So we're going to see a bifurcation of the market. Poor quality buildings, even in prime locations, are going to go a lot lower rent than well-built, well-managed buildings with amenities. That's a must-do now in a lot of the offices we're seeing. Tenants are demanding it and we're seeing people move out of buildings to go to new buildings with the right credentials.
Greg Hyland
And Spencer, to put some context around one of the markets around South Korea during Covid and over the last few years. South Korea has been probably one of the best performing office markets in the world. We've had multiple years of double digit rent increases. Vacancy rates across all three CBDs are at frictional level. So these assets are really performing quite strongly. And I think some of the challenges that we do see, is investors that have had large portfolios in the US and Europe that have had substantial disruption in value, have really struggled to allocate more money to office in this part of the world. But it is performing very well and those cash flows are growing quite strongly.
Spencer Levy
John. Asia-Pacific is a big place, so this is probably too big of a question to say how's it going in Asia-Pacific real estate? But, why don't you give us some of the highlights that you're looking at right now? By market, by asset type.
John Pattar
Sure. Well, first, we're very thematic in how we approach the markets. So what we look at is what's driving growth. And, for us, there are some key themes playing out across the region which are common. First is the growth in hospitality, which is driven as much by intra Asia travel as domestic travel. So we like the hospitality sector. We're seeing a growth in rental accommodation. Multifamily is significantly behind in the development compared to the USA, but we're seeing the growth of rental demand coming in for Asian families in Korea – China. It's always been there for Japan. It's a long standing asset class in Japan. And, now we're also seeing it grow in Australia as Australia's immigration grows. So there are certain trends and patterns we're seeing across Asia which are common. And then we've also seen logistics, the huge growth in e-commerce across the region. The demand for dry and cold storage mirrors what happens in the USA and Europe. So we're also seeing that. So when we look at the state of play in the Asian markets, we haven't had the same inflationary pressures that a lot of the USA had. We don't have – other than Australia – we did not have a lot of support systems during Covid. So the governments have still got very strong surpluses, and so they're able to deploy them to sort of really stimulate their economies. And we haven't got a huge overhang of debt which is required to, to be fixed – and as they are in the West. And then office is not a debt asset class in Asia. The ability for people still to use offices, as long as they comply with certain rules and regulations of how they comply with the green codes, that's increasing across Asia. People like offices which have got a good environmental feel. We're seeing these staple food diets of office still very, very relevant. And then finally we should mention retail. People still like shopping in Asia-Pacific. So it's not a dead asset class in the Asia-Pacific. So in a summary, we're seeing all of these coming back post-Covid and the reopening in all of those sectors.
David Cheong
John and I are aligned in our strategy. So the only thing that I would add to what John has mentioned, that I think is pretty unique to us is, we at KKR as an organization. Is not just a grocery company, obviously, but have other strategies, including private equity, infrastructure and credit. And each of the countries that were operational within Asia have boots on the ground presence with these strategies and all these guys, you know, we have very strong connectivity with one another, and they oftentimes result in a much more in-depth dialog with various corporate owners of real estate. That's been a strong differentiator of our presence in this market. So in addition to real estate sectors that were targeting Japan, particularly, with all that's happening with the Tokyo Stock Exchange encouraging more corporate efficiencies, activist investors going after one another, move towards more balance sheet efficiencies. And we're seeing a lot more deal flow coming from real estate assets that are held by Japanese corporates, which is quite different from maybe two to three years ago. In terms of other markets within Asia, in markets like Korea, office has been a pretty interesting asset class compared to what you see in other markets like Europe – the United States. We own a couple of, office assets, in our portfolio and, not just recently, but even during 2018, 2019 and throughout Covid, we witnessed a very healthy – first of all, uptick in occupancy rate as well as healthy, growth in net effect for rent in double digits. And that's been a very interesting trend for us to observe as a global real estate platform, that's quite contrasting to what's happening in the rest of the world, which has given us a lot of learning in terms of how we think about office as an asset class. Hospitality is a key theme for us across the region, but particularly in markets like Japan, where the number of tour survival has really exceeded the pre-COVID level. I am based in Tokyo. But, the amount of tours that you see on the streets and the demand for hotel products is just unprecedented. And the outlook is – there's more upside to what we're seeing in terms of the tour survival which is all supporting our thesis on the market. So all in all, when it comes to some of the key sectors that we're focused on, I think we're witnessing a lot of positive tailwind, which has been very helpful to our strategies.
John Pattar
One of the things that's quite clear is Asia as a diversification out of the USA, Europe is really important. We've got different growth levels. We're actually seeing the benefits of diverse – We're no different from CBRE, in that we're a USA company and our principal focus is Asia-Pacific to get that diversification. So we see a growth trajectory that's outpacing USA and Europe. And nothing's changed in the growth in the middle classes. Nothing's changed. It's just our opportunity set seems to be much broader in this region country by country. And there's no one sort of rule for Asia-Pacific. Every single country is very different. And that gives you diversification by sector as well as by country within the diversification in a global portfolio.
Greg Hyland
The way we look at Asia-Pacific, and it's a very broad base. We sort of slice it down to be developed Asia and developing Asia. And they all – the economies operate in different manners. And for us developed Asia is Japan, South Korea, Singapore, Australasia. And then we have the developing countries which offer different growth dynamics and an emergence of middle class. So when you look at Asia Pacific as a whole, it's a really diverse and dynamic opportunity set from both developed economies and developing economies.
Spencer Levy
What kind of opportunities are we seeing in China today?
Greg Hyland
Structurally, a lot of the sectors have been materially overbuilt – and I'll just use some examples. Vacancy rates in the major cities – and I'll reference Shanghai and Beijing – are between 20% and 30%. So there's a lot of structural oversupply that needs to be worked through. There's a lot of commentary around the residential market and the overbuilding and parts of the residential market as well. So I think, yes, there will be presenting opportunities, and we're starting to see it on the ground now where pricing has been materially rebased, supported by extremely low interest rates. And we expect that those may even move lower to start to try and stimulate the economy. But it does feel like it's going to be a multi-year recovery before we start to get back into a growth mode.
Spencer Levy
What asset classes in China are people looking for? Is it mostly industrial or is it moving beyond that?
Greg Hyland
Industrial was the preferred asset class for a long period of time. But, supply has caught up. And even in the markets like Shanghai and Greater Beijing, there's material oversupply and there's pressure on rents. Probably the one market that has outperformed is southern China, and that's been driven by some of the online retailers which are selling products into the United States and globally. So that's a huge drive in demand. The supply response that usually does occur in China is starting to come in southern China. So it will be interesting to see how that plays out over the next year or so.
Spencer Levy
India is a country that has been mentioned throughout my entire career as the next country up in terms of growth, in terms of real estate, the fundamentals there, in terms of demographics, look as good as you're going to see in most places, certainly in certain pockets within India.
John Pattar
A few things I should mention. We're one of the biggest investors in private equity in infrastructure in India. So we do see opportunity sets for our broader businesses because of that demographic trend, the growth in demand, consumer demand, we're playing consumer plays. But for us as real estate investors, we've also got to look at what's our uptick. There's very few existing products to buy, so you're going to have to take development risk. Secondly, you're going to probably have to get a joint venture. And thirdly, the biggest issue that we look at in our funds is that which are relatively short duration, they can be eight years with two one year extensions. What's our exit liquidity? And if you look at exit liquidity, it tends to be the public markets only at this point in time. There's not a huge deep pool of investors who are willing to take out stabilized income assets. So I view it as 25, 30 years behind China. It's a point in time when we’ll enter into the Indian market, and it could well be through something like logistics. But like China, I don't think it's ever too late or too early. There's a time to say now is a good time because we've got a local platform, local group. We understand the market, there's more maturity in the real estate market, and you can repatriate your capital without all the restrictions you have to get your capital offshore. So that point in time, I think we'll revisit India and relook at it, because we did look at it and have looked at it from the credit point of view – real estate credit. But next is the equity part. I think we'll probably be in there within the next three to five years.
Spencer Levy
And, Greg, let's touch on some of the issues that John just mentioned: exit, liquidity, the ability to find existing stock versus taking other types of risk. How do our investors see it? And we know we're here with KKR today, but are we seeing more investors, coming to Asia-Pacific, notably places like India, or are we still seeing them primarily in Tokyo, primarily in Seoul, primarily in Australia?
Greg Hyland
I think one of the things that investors look at is relative value in returns and what we do, foreign markets start to correct. Investors tend to gravitate back towards developed markets where for the points that John mentioned, liquidity, depth of the markets and perhaps repricing in those markets tend to be on a look forward basis – those returns look attractive. So what that means for developed markets like India is the return expectations and cost of capital increase. And just to put some reference figures around it, most of our clients that are taking ground-up development risk in India are seeking IRRs well in excess of 20%, 25%. That's a levered IRR. It's a fairly steep hurdle to me and in some instances now because of the high growth, they are achieving that. But, John is right with regards to the exit in India. Historically they have been very difficult to achieve. There is a listed market there, but it is relatively small at the moment. There are larger wholesale trades, which CBRE has been able to facilitate for some of our clients. So over time that liquidity pool will increase. And look, I lived in China a long time ago and there was similar issues there with regards to exits and liquidity and over time that started to improve. So these markets will get there. I think what you said, Spencer, around the demographics and the macro of India is really quite spot on. It’s an attractive proposition despite the challenges that you do have at a project level.
Spencer Levy
Let's talk now about some of the vehicles that are used to invest throughout Asia-Pacific. KKR is obviously enormous in terms of the number of vehicles, the types of vehicles it uses. Could you just talk a little bit more about those? Maybe even your insurance company, because KKR has assets on that side as well? David.
David Cheong
Yeah, sure. So maybe we break it down into different risk return spectrum. So the main vehicle for us is value add and opportunistic. We also have a core plus mandate that's targeting investment opportunities in Japan, Korea and Australia as well as Singapore. In Japan we have a very large JREIT business, which we acquire about two and a half years ago from Mitsubishi and UBS Asset Management. That is on a combined basis, one of the largest JREIT asset managers, which in effect makes KKR one of the largest real estate asset managers in Japan. That asset manager manages two listed REITs, one's called JMF, that's publicly listed Japan Metropolitan Fund. The other is called IIF, Industrial Infrastructure Fund. And as the name suggests, JMF owns and manages assets in the multifamily hospitality, office, more centrally located properties, retail as well. And then the Industrial Infrastructure Fund, IIF, they own and manage logistics assets, data centers, factory, land and things like that. So on a combined basis, we're actually covering the entire, technically the Japanese real estate sector when it comes to the JREIT market. We just started to review opportunities to deploy our insurance capital. So KKR now fully owns a company called Global Atlantic, which is a reinsurance business that we acquired over the past two years. And their primary market is obviously the United States. But the second largest reinsurance market is Japan. So naturally as a way of expansion of that business. We're targeting Japan as our next stop. And we're actively reviewing opportunities to deploy the insurance capital, not just in real estate, but also infrastructure in private equity and credit as well. But we have a very healthy pipeline leveraging the asset management platform they require. So the business that we own, that manages JREIT, is not just a JREIT manager, but it is able to manage capital on behalf of different pools of capital that KKR manages with close to, now, 170 people just solely dedicated to Japan real estate, working hand-in-hand with our team.
John Pattar
A lot of what we're doing is – you've got to remember – is driven by our global investor base. So every vehicle is – we're not throwing darts at a board and saying, let's create a vehicle and see if people are interested. We're given lots of input from an investor base globally. We've got an in-house fundraising team that's constantly talking to investors. So our vehicles, naturally our flagships have always been probably at the value end spectrum. That's true of whether it's private equity, infrastructure, and now, real estate. But we've also noticed to get growth, for growth in the region, we need to offer a suite of things. There's a great number of different opportunities. And that's why you'll see whether – it's almost like we do the public and private markets. So our public market, foray, we wanted to go into the biggest REIT market after the USA, which is in effect, Japan. So there was a rare opportunity to buy a platform. They rarely come along, but we wanted to be in that market. The permanent capital was attractive to us.
Spencer Levy
Greg, let me turn to you for just big picture transaction volume, what you expect to see. It's fair to say that the United States last couple of years were really tough, and now things are getting better as we have a much more stable interest rate environment and optimism that interest rates will come down. How would you describe the market overall? Is it getting better? Where was it? Where is it going?
Greg Hyland
Yeah, the way I talk about or look at Asia-Pacific, it's operated at multi-speed environments. You know where David’s sitting, we're talking about Japan really hasn't skipped a beat. Interest rates and monetary policy has been super accommodative. You look at China, transaction volumes are down materially and the markets where rates increase – Korea and Australia – we had significant drop off in transaction volumes. So during the downturn it was multi-speed. Asia-Pacific overall outperformed Europe and North America. I think in the recovery phase, when we looked at that forecast in December and January this year, I think the expectation and some of the expectation, the US is that central banks would start to cut rates sooner than what they have and perhaps go down to a lower level that hasn't eventuated. And that's pushed back the recovery. And I think when we look at our mid-year forecasts, we're expecting transaction volumes broadly across Asia-Pacific to be up between 5% and 10% this year. We've downgraded that to about flat to 3% and that's just a delay in the recovery in transaction volumes. We can see our order books are really filling up. It's just the time period to execution. So we expect what perhaps may have started to occur in Q2, Q3, Q4 is being pushed back a quarter or two. So 2025 is a year where we expect that most places will be in a recovery mode. We expect a pretty strong rebound in volumes.
Spencer Levy
So let's talk a couple more issues and we'll wrap it up. Infrastructure. I think the definition of infrastructure has expanded. I think that traditionally infrastructure were things like water treatment plants or other things that would service the broader public, that didn't include data centers, that didn't include logistics. But, now, I think that the definition of infrastructure is wider. It crosses clearly into what I would have called the real estate space. How does KKR see that, John? Do you work together with them? Separately? What asset classes would you put into infrastructure?
John Pattar
It's really straightforward. First, we do operate together. We genuinely are one team and we've got resources we can pull in for all different types of deals from different skill sets, whether it's the infrastructure team, the PE team, and our own team, which supports sometimes PE deals because there's a heavy real estate component to it. So one thing is quite clear. It's one of our biggest strategic advantages in-house, we have every possible skill set to deal with dislocations that we see and opportunities we see, and we can dissect deals and sometimes say, this is for the infrastructure, this is for PE and this is for real estate. I'll be more specific, though. I view infrastructure is fairly straightforward. If you're investing in operating companies, managing data centers or logistics, and you're looking at long term investment in these companies, I would say that can be classified as infrastructure. If you are looking at land and you're developing that land and looking for tenants, that's a development of a piece of real estate. It should be real estate – falls into it. And what we do with our infrastructure teams is we talk to them in exactly those veins. And we said, if there's any doubt, we'll just do the deal together. The thing about infrastructure is, however, there are longer term hold than us. So sometimes our capital is not matched because they have a longer term hold on that's probably a mid-teens return compared to our return. So I would say that we're more likely to do deals where we take the property risk, and they'll take the operating company risk. There we can definitely work together. So I have no doubts. It's just a question of communication between the groups as to how you decide what constitutes a real estate investment versus an infrastructure investment. I think infrastructure where it becomes a little bit interesting is how do you value, say sometimes affordable homes is classified as we are improving our infrastructure. China has slightly confused the issue because they've called logistics infrastructure. That's a good thing because it folds out the umbrella of a lot of real estate restrictions. But, there is a case being made by some infrastructure groups that logistics equals that. I still go back to my original definition. If you're buying land and you're developing it, and you're finding tenants, that's a real estate deal. If you're investing in the operating company, managing those logistics, I would say that could conceivably be an infrastructure deal.
Spencer Levy
Let's ask one more asset specific question and then we'll wrap it up. And this will be on apartments or multifamily. I recall 15 years ago the multifamily market was immature throughout Europe and I think the market in Asia is now robust or getting more robust. Is that where you see one of the best opportunities in housing, David?
David Cheong
Absolutely. Every market is different. But when it comes to markets like Japan, we already have a very liquid institutionalized multifamily asset class, right. So there's a very high trading volume in that sector. And I think in the examples that would be given so far, for example, with dealing with corporates to source assets at a discounted value and things like that, we're able to source increasing transactions and still create opportunities in return, particularly in an environment where your borrowing rate, even at higher LTV, is still very much favorable in this market. So that's a very interesting asset class with a scalability, and without taking too much risk I think you're able to create a very good value at that return, particularly given the strong wage growth that you're seeing in Japanese corporates. Right. For the past, let’s say, 30 years, people didn't see much wage growth in their paychecks. But since two years ago, I think there's a consistent growth rate in excess of 5%. And then many small and large companies are coming out and saying, okay, we're going to increase our average wage by anywhere between 8% to 13% across the board. So all of that is helping us, first of all, increase rent. And then with more proactive asset management that's really straight down the fairway type of opportunities everywhere else in Japan. We're starting to see more and more, first of all, domestic institutions taking an interest in the sector as an institutionalized asset class. There's more demand from individuals seeking more institutionally managed rental products, so that they don't have to face individual condominium owners as their landlord. There's some structural reasons, for example, in Korea that is creating this rapid shift for a preference from individually owned rental units to institutional rental units. We're very active in that market right now, trying to create supply for people that are in the age group anywhere between 20 to mid 30s that want more flexibility, security against your deposit and things like that.
John Pattar
Let me just add, Spencer just two to three points because they are quite important on this, because you're always going to get this issue that's mentioned about Asian populations, in particularly Japan and Korea. But here's – a curious thing is we're seeing growth in Seoul, we’re seeing growth in Tokyo and Osaka, because the aging populations are moving from the countryside into the towns. So the net demand is increasing for residential accommodation, not only from the rapid urbanization caused by young people looking for jobs, but we're actually seeing the elderly – which is opposite to a lot of the West, where people sometimes prefer to go back to the country towns and live a quiet life. In Asia, people want to be closer to relatives, closer to facilities, closer to everybody and anything so they can stay sort of in touch with the arts that are restaurants. So I'd see it as although there's a net negative population growth in certain areas coming through, the cities are still growing and that's still driving multifamily.
Spencer Levy
Let's wrap this up now with some final thoughts, starting with you, Greg. What do you see over the next couple of years in terms of the evolution of the Asian capital markets, generally speaking? Go ahead, Greg.
Greg Hyland
I think the markets will continue to evolve. When you look at firms like KKR, what is normal in the US, we think will become normal in this part of the world with regards to the availability of product to institutional and retail investors. And as people move up in the income scale, they’ll demand and want those products which will provide more capital to invest into the real estate space. So, as I said, Asia is a very diverse place. There's, there's developed market opportunities set, which is very sophisticated and looks very much like how US investors would look and view and underwrite real estate – and there's developing opportunity. So it's an exciting place and we're very optimistic. I think when you look at the forecast growth figures, it will be above trend compared to some of the developed markets in the US and also Europe. So, Spencer – optimistic. We'd love to see some of your US investors head our way.
Spencer Levy
David, what's your outlook for the next couple of years in the Asia-Pacific markets?
David Cheong
Take a step back and think about the correction that we went through the past couple of years in this market, particularly in markets like Korea and Australia, and what China is going through and the structural shift that's happening in Japan. They're all driven by different factors. But, one consistent theme that we're also witnessing, we actually didn't talk about today, is the overall supply volume that's being introduced to the various sub-sectors that we're looking at. And they're actually quite low, right. Whether it's hospitality in Japan or logistics, a lot of supply that's been introduced over the past four, five years have started to be more digested. Right. When it comes to living, there's more demand and supply. And going forward, I think the overall ability to create new supply in these teams that many of the investors in our sales are targeting is going to be very low. So I think with the right team selection and right set up, right operator partners and the right capital, I agree with Greg in the sense that I am quite optimistic as to how the overall investment horizon is going to pan out over the next three to five years in this market.
Greg Hyland: Spencer, I might just add on to that. Around the supply side, what we're really finding is, and it's similar to what I understand is happening in the US construction inflation in this part of the world is real, and it's really making it challenging to procure new supply. So there is a gap that's building, which is creating the dynamics which will bring into a quite a strong recovery in the cash flows in some of these markets. It's impacting the ability to bring on new supply.
Spencer Levy
John, we’ll give you the final word, your outlook for the next couple of years for the Asia-Pacific real estate markets.
John Pattar
Well, first, I think the high conviction themes that David and even Greg has outlined are important. All these secular growths, these urbanization trends. What I like is the varying pace of repricing that's taking place across Asia, giving us opportunities in Asia Pacific to do different things in different markets according to where the dislocation is or the pricing power. But, here's the thing, which I think probably is going to significantly change in the next two years, which we haven't really touched on in the time we've got, is the growth in private wealth. If you see private wealth and you're looking at the growth in pension fund industry, looking for stabilized income assets, how private wealth and cross-border traffic is increasing inta-Asia, we're always talking about Europeans, Middle East and the USA. I think intra-Asia's going to get more and more interdependent on each other. And I think that private wealth growth is phenomenal. The ability of these family trusts are now having a huge influence, in the same way we've seen some of the great European houses and names come across here. LVMH comes to mind. We're actually going to see a lot of that now. We're going to see the Chinese groups. We're going to see some of the Japanese. The Korean groups are going to have a big influence, these private families across the region. So I think that, next two years is about a growth of that. And my final point is, Asia's role in a diversified global real estate platform has never been stronger. That role that it plays in diversifying for the USA and European investors, is still important, and I think that's going to be the key factor driving the next two years.
Spencer Levy
Well, on behalf of The Weekly Take, what a great conversation talking about the Asia-Pacific real estate market, starting with John Pattar, the KKR Head of Asia-Pacific Real Estate. John, great job. Thanks for joining.
John Pattar
Thank you for inviting me.
Spencer Levy
You bet. And David Cheong, a Managing Director based in Tokyo with KKR. David, terrific job.
David Cheong
Thank you very much.
Spencer Levy
And then our old friend Greg Hyland, who after a three or four year hiatus, has made it back to the show. We were delighted to have you. Well done, Greg.
Greg Hyland
Thanks, Spencer. Hopefully it's not three or four years again. Until next time.
Spencer Levy
For more on the Asia-Pacific region and related content from our show, please visit our website: CBRE.com/The Weekly Take. And if these insights piqued your curiosity for more tactical information and strategic analysis, don't touch that dial. We'll be back next week with more global insights. Meanwhile, we hope you'll share your feedback and also subscribe to The Weekly Take wherever you listen. Follow us on LinkedIn too. Thanks for joining us. I'm Spencer Levy. Be smart. Be safe. Be well.
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