Omnichannel Retail and its Impact on Asia Pacific Real Estate (CBRE)
E-commerce has grown rapidly over the past five years, with expansion accelerating since the pandemic. Despite e-commerce penetration moderating from pandemic highs after restrictions were lifted, CBRE expects future growth in Asia Pacific to continue to outpace the rest of the world. Of the six key e-commerce drivers identified by CBRE, Asia Pacific possesses a distinct advantage in three: Urban population growth, adoption of digital wallets and a vibrant e-commerce ecosystem.
As the retail industry continues to evolve toward omnichannel, so too will the role and functions of physical stores. Retailers and landlords need to re-invent themselves to prepare for the evolution of retail and the rise of omnichannel.
The growth of e-commerce is also driving robust industrial & logistics property demand, although the supply pipeline is unlikely to meet future demand. Logistics occupiers are advised to explore build-to-suit developments and invest in the latest warehouse technologies.
Key highlights from this report include:
CBRE forecasts Asia Pacific’s e-commerce penetration rate to grow to 35% by 2026. However, e-commerce penetration will vary across different product categories.
Korea, mainland China, Indonesia, Australia and Taiwan are expected to be the five most penetrated e-commerce markets in Asia Pacific by 2026.
While physical stores will remain essential, the rise of omnichannel is prompting many traditional brick-and-mortar retailers to consider new formats and locations.
Over the next five years, 100 to 130 million sq. m. of additional dedicated
e-commerce logistics space will be required to support the growth of online sales in Asia Pacific.
As the global economy continues to chart a path in the post-pandemic world, real estate investment has a new favourite buzzword – new economy assets. While the term arose with the advent of digital and internet technologies, amid surging inflation and rising interest rates, new economy assets have taken on a whole lot of significance.
So, what is so new about the new economy? A key dynamic is the integration of digital technologies that is overhauling old economy services and products, spurred innovative distribution channels and sparked new, high-growth industries that are plugged into the tech and science megatrends. Increasingly, digital transformation is shaping the way we live, work and play and the real estate sectors underpinning this megatrend is set for a multi-year upcycle.
Riding the digital wave
The evolution of industry with the rise of new technologies is certainly not new. Throughout history, innovation has hastened creative destruction and redefined the global economy, with mobile technologies and the rise of e-commerce at the centre of the digital age. While the shift was under way before the pandemic, the impact of social distancing has been significant. The need to stay connected during the outbreak fast-tracked digital adoption. Across industries, companies were compelled to employ communication and mobile technologies and pivot to tech-enabled services.
The transition has prompted the rise of asset classes that are more geared to the requirements of the digital landscape. From cell towers and data centres to logistics hubs that make online living possible, the saying that real estate houses the economy also holds true in the new digital era. It is simple yet compelling link: megatrends need real estate and the bigger the tech, the more infrastructure required. The impact of digital disruption, magnified, will continue reverberating beyond the pandemic and drive structurally higher levels of technology investment.
Asia Pacific remains well positioned to ride the digital wave. Already by far the largest market for retail e-commerce, the region, home to more than half of the world’s population has over 60% born after 1990 – digital natives that will drive the adoption of digital technologies. According to a survey by McKinsey, this was fast forwarded by four years by consumers in the Asia Pacific while those for businesses leapt by 10 during the pandemic, the highest globally.
A spectrum of investment opportunities
This has cast several alternative sectors in a new light, awaking investors to the potential that such assets hold. Healthcare and Life Sciences became prominent in the wake of the health crisis while demand for streaming content have attracted funds to develop film production studios. Still, although a major headline, new economy real estate is not just about technology. Primarily, it is about capturing the underlying trends that are now rippling across Asia Pacific and globally.
A case in point is the region’s living sector, which is at the forefront of such shifts. Rapid urbanization, ageing demographics and remote working are propelling the nascent living sectors – from Multifamily to Co-living and Assisted Living – into the mainstream and attracting massive institutional funds. As more people gravitate to cities, the need for the required infrastructure buildup has also created a spectrum of long-term investment opportunities. In a low-growth, inflationary environment that we are now saddled with in this new normal, Infrastructure is an ideal countercyclical given its potential to provide high, stable and inflation-linked returns.
The resilience of such sectors is visibly demonstrated in listed real estate. Healthcare, Industrial and Residential REITs, as tracked by the GPR/APREA REIT Composite, have sustained positive annualized returns over a three-year period while those in Office, Hospitality and Retail are in the red. Notably, Industrial REITs’ market capitalization have risen over 50% during the pandemic, and despite the recent correction, remain more than 30% higher than its pre-pandemic peak.
Rebalancing and future-proofing
This new real estate world order have also wrought changes to investment strategies. An important feature in the new economy is the emergence of digital leaders and the inter-dependence of value chains, which create significant network effects. That means achieving scale rapidly is critical for investors to capture a large portion of market share in a sector.
To access the opportunities thrown up in the new landscape, investors need speed with execution. This means a need to build heft rapidly. Across the region, real estate players have restructured and pursuing M&As to expand and remain relevant, with integrated asset and fund management arms that has created an end-to-end platform to develop and incubate real estate developments through to its injection into a public vehicle. REITs with stabilized portfolios of new economy assets in developed markets are now being targeted in mega deals.
The current economic environment is creating an urgent need for investors to rebalance and future proof their portfolios. New economy sectors sit at the crossroads of major demographic and economic shifts as well as technological trends, which are occurring in the region and visibly underserved by traditional real estate classes. Layering in climate change concerns adds a further dimension to the idea of new economy assets, expanding possibilities.
In a rising rate environment and surging inflationary pressures, identifying sectors that are structurally undersupplied with the right long term demand fundamentals which generates positive rental reversions will be crucial in sustaining real returns. On all counts, new economy real estate is a powerful thematic that checks these boxes. These compelling fundamentals, taking place in a region that could eventually host more than half of the world’s megacities, promises a massive investment opportunity in the very assets that will be critical in securing its future.
Prior to APREA, she served as Managing Director of Asia Pacific Research and Advisory Services of Cushman & Wakefield (C&W) from 2010 through 2018, where she was responsible for research, thought leadership, strategy formulation and client management.
A recognized expert in global economic, public policy and real estate issues, Sigrid is a frequent speaker at industry events. Her commentary on commercial and residential real estate markets is also regularly featured in a wide array of global publications, including the Wall Street Journal, Financial Times, Bloomberg, New York Times and Reuters. Additionally, she has made several television appearances on financial networks and radio such as CNBC, Bloomberg, CNN, National Public Radio and Channel News Asia.
The Asia Pacific logistics & industrial market continues to perform strongly, underpinned by strong fundamentals – though there is emerging evidence that growth is switching from the investment market to the occupier market.
Rebound, Revenge & Re-Invent: A New Journey for Retail Realty (Cushman & Wakefield)
The retail sector is considered a core asset class in the Indian real estate industry. Currently, it is recovering from the toughest business climate it has ever experienced due to the pandemic. Retailers, developers, and investors are taking cautious steps while delving into the segment, owing to 2 main factors – the e-commerce onslaught, and higher digital adoption among consumers.
There was a strong return to malls after restrictions were lifted. Revenues and footfalls of mall developers and retailers have largely recovered to pre-pandemic levels.
Cushman & Wakefield’s latest report on a new journey for retail realty addresses:
Rebound – Retail real estate’s current story Revenge – As pandemic fears recede, a shopping culture has emerged Re-Invent – Retailers and mall developers consider the adoption of digital & analytics and tech integrations
To read more about the journey of the retail sector of India’s real estate, read the report: Rebound, Revenge & Re-Invent.
2022 Asia Pacific Hotels & Hospitality Update: A Roadmap to Recovery (CBRE)
Confidence in Asia Pacific’s Hotels & Hospitality market continues to grow as borders reopen and operating performance recovers to pre-pandemic levels.
The recovery continues to be largely driven by domestic demand, with international arrivals accelerating in markets within the Pacific and Southeast Asia, which have loosened entry and quarantine restrictions and are now open to all arrivals. CBRE forecasts tourism arrivals within the region to reach pre-pandemic levels by 2024, with hotels performance to reach 2019 levels in the same period.
Furthermore, given the daily pricing structure and flexibility of rate changes in an evolving economic climate, hotels provide an inflationary hedge. CBRE is therefore forecasting increased investor appetite for operational real estate, such as hotels, as a strategy to enhance and/or maintain portfolio returns.
IndInfravitプラットフォームの投資マネージャーCEOとして、ポートフォリオ資産の管理と成長を担っています。IndInfravit Trustは、インド有数の上場非上場プラットフォームです。総延長5,000kmに及ぶ13の高速道路プロジェクトを所有・運営しています。世界的に著名な長期投資家であるCPPIB India Advisors Private Limited、Allianz Capital Partners GmbH、OMERS Infrastructure Europe Limitedが、同プラットフォームの主要投資家です。.
Unlocking Strategy in a Changing Environment (Cushman & Wakefield)
This report, Part II in Cushman & Wakefield’s Reset 2022 trilogy, brings together the views of a panel of institutional investors as shared during the webinar “Unlocking Strategy in a Changing Environment”.
The analysis in this report draws upon these views along with live audience polling conducted during the webinar and the results of an investor intention survey conducted over approximately three weeks in August 2022.
