Nuveen targets doubling of Apac real estate AUM over next 5 years, weighs acquisitions

[SINGAPORE] Nuveen aims to double its assets under management (AUM) in Asia-Pacific over the next five years, and is eyeing more acquisitions as it seeks to build scale in the region.

The investment manager currently oversees about US$7 billion in real estate assets in Apac, compared with US$135 billion globally.

“Our aim over the next five years is to try to double our AUM in the region,” said Mike Sales, CEO of Nuveen real estate and natural capital, in an interview with The Business Times.

Doubling the regional business could require an acquisition or a team lift-out, he said, with the purchase of a platform one possibility.

Earlier this year, Nuveen announced that it is acquiring British asset manager Schroders for £9.9 billion (US$13.2 billion), in a deal that would create a combined group with US$2.5 trillion in assets under management. The transaction is expected to close on Oct 1 and would increase Nuveen’s real estate AUM, predominantly in Europe, Sales said.

Nuveen’s push to grow in the region comes against a more cautious investment backdrop in Apac, where rising interest rates and borrowing costs are weighing on capital deployment and compressed expected returns.

Investment volumes in the region fell 14 per cent quarter on quarter in Q2 2026, based on Nuveen’s Q3 outlook report.

“Capital deployment has generally slowed in light of the shift in financing conditions. Rising risk-free rates and higher borrowing costs are meaningfully compressing forward-looking returns,” said the firm.

While income growth could partly offset higher rates, Nuveen said the sustainability of strong rental growth remained uncertain as occupier demand showed signs of moderating.

The firm expects investors to place greater emphasis on pricing discipline amid geopolitical and interest-rate uncertainty.

Sales said inflationary pressures stemming from geopolitical tensions could lead to further interest rate increases, pushing up the cost of capital and causing investors to reconsider the timing of their return to the market.

“That’s why we say you need to focus on sectors with really strong demand drivers behind them, driven by the mega-trends: the ageing population and the digitalisation of the economy,” he said.

Opportunities in Apac

Nuveen sees opportunities across the region, focusing on sectors with strong fundamentals and prospects for rental growth.

Japan is one of its active markets, where Nuveen continues to invest in multifamily housing and senior living, while also targeting urban logistics, particularly last-mile facilities of up to about 250,000 square feet in Tokyo.

The residential sector has remained resilient, with Nuveen’s report pointing to population inflows and wage growth as supporting rental demand in Tokyo.

Rents across the capital’s 23 wards rose 2.8 per cent quarter on quarter in Q2 this year, with smaller units in central locations recording stronger growth as young professionals sought to live closer to their workplaces.

Despite narrowing yield spreads as long-term government bond yields have risen, investors continued to increase exposure to Japan multifamily assets, with real estate fund managers the most active buyers in Q2, Nuveen said.

Nuveen is also looking at Japan’s office market, where Sales sees opportunities to reposition older buildings into Grade A properties, taking advantage of the tight vacancy in the market.

Vacancy for prime office space stood at below 1 per cent in Q2, while several prime office developments in Tokyo’s central three wards secured pre-commitments, said Nuveen, noting that reduction in supply risk should support further rental growth.

“You have got to be sure that where you are buying, you are getting the right capitalisation rate,” said Sales. “You have got to be really sure about the rental growth.”

In Australia, Nuveen has invested across office, last-mile logistics, retail and student accommodation. Sales is particularly positive on student housing, where the manager has developed a sizeable portfolio with operational assets in Perth, Adelaide and Melbourne, and developments in Sydney.

Nuveen is also active in real estate debt, which Sales sees as particularly attractive on a risk-adjusted basis.

Its debt strategy lends at an average loan-to-value ratios of 62 per cent, generating an unlevered yield of around 8.5 per cent and levered internal rate of returns in the mid-teens despite it providing more than 30 per cent equity protection beneath the debt, Sales said.

Global economies have experienced significant uncertainty since mid-2022, including rising interest rates, multiple conflicts, trade wars and subdued business confidence. All of this has had a “dramatic impact” on real estate assets, with capital values correcting by around 20 to 25 per cent, said Nuveen in a separate report.

“While challenging for existing owners, this rebasing has created an attractive entry point for new lending. New loans are now structured against current, lower valuations, providing a substantial equity cushion for lenders,” it said.

Real estate debt may offer lower volatility than most other real estate segments and broader public and private markets, while potentially delivering returns comparable to higher-risk asset classes, said Nuveen.

“This is driven by debt’s protected position in the capital stack, the steady income generated through structured loan obligations, and the shorter duration of loans relative to other fixed income instruments (which helps mitigate the impact of inflation and interest rate changes).”