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Singapore has announced that it is lifting a 2019 moratorium on the construction of new data centres, however government concerns about energy efficiency and consumption mean new facilities will need to meet rigorous standards.

In the short term, the number of new data centres will be very limited, with a maximum of three approvals in a new post-mortarium pilot phase, which begins in the second quarter of this year and which will last 12-18 months. The new data centres will also have a cap on their power use: all must be between 10MW and 30MW.

Jack Harkness, director, industrial & logistics, Asia at Savills, says: “The end of the moratorium and permission for new data centres is good news, as is the focus on sustainability, however with only three approvals in this pilot phase, competition will be fierce.”

The Singapore government imposed a moratorium on construction of new data centres in 2019, due to concerns about the amount of electricity they use. At present, the city-state has 70 data centres with aggregate capacity of 1000MW; the sector uses around 7% of Singapore’s electricity.

However in January, Minister for Trade and Industry Gan Kim Yong said: ““While we continue to welcome data centre investments, we intend to be more selective of which DCs we can accommodate. In particular, we seek to anchor DCs that are best in class in terms of resource efficiency, which can contribute towards Singapore’s economic and strategic objectives.”  An online meeting later outlined the government’s requirements for new centres.

Data centres use electricity to power the servers running inside them and more significantly to keep them cool, as thousands of servers running constantly generates a lot of heat.

The efficiency of data centres can be measured by Power Usage Effectiveness (PUE), a metric which evaluates the energy performance of a facility by calculating the ratio of the energy used as a whole to the energy used by the IT equipment alone. A perfect score would be 1. Singapore will require that new data centres have a PUE of 1.3 or lower. A typical data centre has a PUE of around 1.5-1,7, while the newest data centres in Australia and South Korea, for example, have target PUEs of 1.2-1.4.

Applicants with a track record in building and operating data centres in Singapore will be considered favourably, government officials said. In the longer term, Singapore is determined to remain a data and connectivity hub, they added.

The end of the moratorium is expected to provoke a rush of applications as data centre developers and operators compete to be one of the three approved data centres during the moratorium period. “We expect fierce competition for the limited permissions from developers and operators already present in the market,” says Harkness. “We may also see joint ventures between private equity real estate funds and operators, as we have seen in Australia and South Korea.

“The Singapore data centre market will be entering a new era, where efficiency is crucial. Over the longer term, as newer facilities with lower PUEs come onstream, we may see a flight to quality. This would create opportunities for redeveloping older data centres.”

This article was originally published in https://www.savills.com/prospects/sectors-sustainability-is-paramount-for-singapore-next-gen-data-centres.html

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Ready or not, the metaverse is already a force to be reckoned with. This fast-evolving network of virtual spaces is not just defying physics – it’s set to redefine real estate as we know it.

The metaverse is a network of virtual spaces where people can socialise, play, work, and even own property. On this platform, billed as the next iteration of the internet, just about anything is possible – owning a Grand Slam tennis court in pixel form, becoming the virtual neighbour of millionaire celebrities, or acquiring a stake in a digital shopping mall selling high fashion.

But can virtual worlds generate tangible value for occupiers and investors? According to our experts, the answer is an emphatic yes.

With names like The Sandbox and SuperWorld, virtual communities are beckoning investors, developers, occupiers and an entire generation of digital natives that have grown up inhabiting avatar-filled online games such as Minecraft and Roblox. Despite the nascency of the concept, the metaverse is on the cusp of fomenting a real estate revolution, with sales of virtual land exceeding USD500 million in 2021 alone and expected to double in 2022.

Just as technological advances took us from dial-up modems to blazing-fast broadband, we see the immersive nature of the metaverse as the logical next step in the ongoing evolution of the internet. With Covid-19 encouraging people to shift more of their lives online, recognition of the metaverse’s potential to transform everything from the retail experience to office interactions is growing.

“People are very curious at the moment and are asking: ‘What’s so special about the metaverse?’,” says Hannah Jeong, Head of Valuation & Advisory Services | Hong Kong. “The answer is that it’s a place where no matter who or what you are, you can do just about anything. It is accessible to everyone.”

Businesses everywhere are also eager to understand what the metaverse means for their operations and how it can be best harnessed. Because virtual properties are relatively easy to create, experiment with and upgrade, developers, as well as landlords and occupiers, can explore the metaverse to complement their offerings in the physical world, according to Jeong.

Given that the supply of virtual land is unlimited, metaverse assets are going for a fraction of the cost of physical land, prompting companies and investors around the world to rush into the space. Developers, meanwhile, are keen to deploy it as a marketing tool, building communities to attract a new generation of clients that may struggle to afford physical property. Furthermore, real estate investment trusts (REITS) are looking to capitalise on opportunities to acquire, create and lease digital assets in the metaverse.

Jeong notes the metaverse also promises to take the virtual tours that developers and investors have relied on to continue dealmaking during Covid-19 to an entirely new level. With cutting-edge virtual reality (VR) and augmented reality (AR) tools, it’s become possible to inspect the features and finer touches of properties, even entire neighborhoods, in any corner of the world without traveling a step.

“While nothing can replace face-to-face interaction, the metaverse can make the virtual interaction much closer to physical interaction than any technology we’ve had previously,” agrees Bajpai. The metaverse is set to have significant impact in the retail sector, in particular by providing companies an interactive platform to advertise and market their products, which will help enhance sales in the physical world. Additionally, it will create fresh revenue streams by enabling firms to monetise digital versions of their physical products in the form of NFTs, Bajpai says.

As businesses look to exploit the metaverse’s vast potential, it’s important to bear in mind some key caveats.

For starters, the metaverse has no significant barriers to entry, which is a plus when it comes to inclusion, but also allows for the kind of crowding and speculation that leads to volatility, notes Bajpai. And while it’s currently dominated by platforms like Decentraland, the landscape could change over time with the entry of other players – just as internet pioneers Netscape and MySpace were completely displaced by Google and Facebook.

Bajpai notes it’s also crucial to understand that while location and footfall may not play as big a role in the metaverse as they do in the physical world, they will remain key considerations in asset appreciation.

The ever-present technology risks of privacy and cybersecurity are exacerbated in the metaverse, which, for now, is an unregulated space. The fact that cryptocurrencies feature heavily in metaverse transactions adds an additional layer of volatility, and sustainability concerns given the vast computing power and energy consumption they require.

However, Jeong notes regulators and private entities in Asia Pacific and elsewhere are already working to address these challenges. “Many countries are looking at this issue closely, and trying to regulate the crypto market and change market behaviour,” she says. “The cryptocurrency community is also putting together plans to reduce their carbon footprint and become more ESG-friendly.”

In the years ahead, a combination of technological advances in areas such as 5G, VR, artificial intelligence and blockchain, as well as the rise of a digitally native generation, will push the metaverse further into the real estate mainstream. This means every industry player will have to formulate a metaverse strategy of some kind.

“There’s a lot of opportunity in the space,” notes Bajpai. “That’s why we’re really focused on building our technical advisory capability, so we can outline to clients the advantages and the challenges, and guide them through the process if they decide to take the plunge.”

While the metaverse will never replace real-world assets, our experts see it becoming more and more capable of cultivating synergies with the physical world, and underpinning exciting new solutions and business models for owners, occupiers and investors.

This article was first published in https://www.colliers.com/en-xa/news/e22-expert-talks-real-estate-in-the-metaverse

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The region’s equities continued to struggle for direction in February ahead of the looming Fed hike. However, Russia’s incursion into Ukraine put paid to investors expectations looking to buy the dip. The conflict and subsequent sanctions heightened selling pressure, as volatility rose across global capital markets. Energy prices and commodity prices surged amid concerns on the supply of Russian oil and gas as well as agricultural produce from the region. The likelihood of even higher inflation revived fear of a 70s-style stagflation, which will drag on the fragile recovery from the pandemic. Returns from Asia Pacific equities, as measured by MSCI, fell into the red as investors sold down riskier assets. Still, with inflation racing, bond markets ended little moved as investors remained braced for higher rates, given the Fed’s resolve to anchor inflationary expectations. However, the episode underscored the resilience of the region’s REITs, which managed to eke out a marginal gain as its defensive qualities shone.

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The region’s markets opened 2022 in negative territory due to expectations of rising inflationary pressures, a potential reversal of quantitative easing, and higher interest rates. In its first meeting of the year, the Fed indicated that a rise in its benchmark rate will soon be appropriate with inflation running well above target and the labor market approaching maximum employment. This means the initial quarter-point rate-hike of the cycle is likely to kick in at the next Fed meeting in March. Asset purchases will also be cut to US$30 billion in February and come to a halt by March. Analyst are now penciling in a more aggressive tightening cycle of at least a 25-bps hike at each of the Fed’s meetings for the rest of the year. REITs bore the brunt of the negativity to underperform both bonds and equities in January.

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  • Two years since the onset of the COVID-19 pandemic, there is light at the end of the tunnel for the Asia Pacific hotel sector as more markets across the region ease border restrictions in an attempt to reboot business and leisure travel.
  • CBRE expects improvements in visitor arrivals and room occupancy to begin to emerge in Q2 2022, with Southeast Asian leisure markets set to outperform as tourists seek out open-air environments.
  • Other key trends anticipated to emerge this year include consumers gravitating to trusted hotel brands, taking longer trips and placing a stronger emphasis on hotel ESG performance.
  • This year will also see a further improvement in hotel investment volume as newcomers and experienced investors seek greater exposure, with the weight of capital chasing Asia Pacific hotels now at an all-time high.

This report was originally published in https://apacresearch.cbre.com/en/research-and-reports/Asia-Pacific-Hotel-Market-Outlook_Trends-to-Watch-in-2022

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The enhanced principles were based on feedback from industry participants and stressed the importance of stewardship outcomes.

31 March 2022, Singapore – Stewardship Asia Centre (SAC) today released the second edition of the Singapore Stewardship Principles (SSP) for Responsible Investors, updating practices to enhance Singapore’s investment environment. The revisions were driven by a 10-member steering committee, supported by the Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX).

Singapore first introduced the principles in 2016, outlining practices related to the core behaviour and actions associated with stewardship to promote active and responsible investment.  Since then, capital markets have undergone profound developments as global concerns intensified over the impact of financial investments on the economy, society and the environment. Stakeholders emphasised that investors should become better stewards by demonstrating a genuine intent to deliver sustainable performance and long-term value to clients and beneficiaries, as well as to factor in environmental, social and governance (ESG) considerations. The steering committee took into account the global market developments in shaping the principles. An industry survey was conducted in March 2021 to garner feedback from the asset management industry on their perspective of investment stewardship. This was followed by an open consultation to obtain stakeholders’ feedback on the draft of the updated SSP in November 2021.

“We received feedback from more than 20 stakeholders. These recommendations were taken into consideration to enhance the principles in the areas of internal structures and governance, stewardship beyond listed companies, and ESG considerations. We urge the financial services and investment industry to adopt the updated SSP and make a greater commitment towards responsible investment,” said Rajeev Peshawaria, CEO of SAC.

An as industry-led initiative, compliance to the principles remains voluntary. However, under the enhanced SSP, signatories are strongly encouraged to submit evidence of their stewardship efforts annually to the secretariat of the steering committee.

Abigail Ng, Executive Director and Head of Markets Policy and Infrastructure Department of MAS, said: “MAS is supportive of SAC and the industry’s collective efforts in updating the Singapore Stewardship Principles. Effective stewardship calls for a multi-stakeholder approach by market participants including asset owners, asset managers and service providers. Responsible investment stewardship can help raise corporate governance standards, drive positive change and create sustainable long-term value for all stakeholders – not just for the individual company or investor, but also for the wider economy, environment and society. This is in line with MAS’ efforts to promote sustainable financing in our financial sector. We strongly encourage market participants to become signatories of the SSP and to co-create sustainable business value in an environment of good governance.”

“SGX supports the updated Singapore Stewardship Principles for Responsible Investors. Institutional investors, through their investment strategies, play an important role in the allocation of capital to companies. Institutional investors can shape the practices of their portfolio companies through active stewardship and their investment decisions. This is especially pertinent with the market’s increased focus on ESG considerations and outcomes. With institutional investors engaging actively with companies, I hope SGX-listed companies will be more motivated towards creating and sustaining long term value,” said Tan Boon Gin, CEO of Singapore Exchange Regulation.

Industry participants, including asset managers and asset owners, welcome and support the updated principles.

Amar Gill, Head of Investment Stewardship for APAC, BlackRock, said: “The updated SSP and its enhanced rigour reflecting international developments and local trends in stewardship and corporate governance are welcome steps towards creating a positive investment ecosystem in Singapore. Its guidance will help managers like us and companies themselves protect and advance the economic interests of long-term investors like our clients.”

Sherene Ban, CEO of Singapore and Southeast Asia of J.P. Morgan Asset Management (JPMAM), said: “Active ownership is woven into our active management heritage and we constantly evolve our sustainable investing approach to keep pace with the changing requirements of our clients and regulators. The renewed principles, including monitoring investments regularly, staying active through constructive and purposeful engagement, and taking a collaborative approach in exercising stewardship responsibilities, are in line with JPMAM’s approach to stewardship and engagement.”

Prudential Singapore’s CEO Dennis Tan said: “In the drive for sustainability, every voice matters. We are proud to be an SSP signatory as its principles are aligned with our approach to responsible investment. Through active engagement with companies in our investment portfolio, we aim to achieve our net-zero target by 2050. We look forward to working collectively to further our commitment to creating a stronger, healthier future for all.”

Manish Tibrewal, CEO of Maitri Asset Management, a multi-family office, said: “Given the complexities of managing ESG issues, regular communication and collaboration form a key part of how we engage with our portfolio companies. At Maitri, we constantly align ourselves with industry-leading standards to engage with our portfolio companies. This has enabled us to exchange knowledge and further hone our ESG expertise in a transparent manner so both investor and investee are constantly ahead of the curve when it comes to adapting to the latest ESG trends.”

For more information about the updated principles, also known as SSP 2.0, please click here.

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About Stewardship Asia Centre (SAC) 

SAC is a non-profit organisation established by Temasek, dedicated to helping business and government leaders, investors and individuals activate stewardship practices through research, executive education and engagement. We define stewardship as creating value by integrating the needs of stakeholders, society, future generations and the environment.

Steering Committee of SSP 2.0:

Members

Stewardship Asia Centre (Chair and Secretariat)

Association of Chartered Certified Accountants

Asia Pacific Real Assets Association Ltd.

CFA Society Singapore

CPA Australia

Investment Management Association of Singapore

Institute of Singapore Chartered Accountants                

Securities Investors Association (Singapore)

Singapore Institute of Directors

Singapore Venture Capital and Private Equity Association

Supported by

Monetary Authority of Singapore

Singapore Exchange

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  • Mainland China’s pursuit of zero-covid continues to result in sudden and intermittent disruption to manufacturing, logistics and supply chain operations.
  • CBRE expects this environment to drive the further strengthening of just-in-case strategies as occupiers look to build up inventory to mitigate potential disruption – a trend that will generate substantial new demand for industrial and logistics real estate on the mainland.
  • As industrial and logistics occupiers look to extend their footprint to emerging hubs, tier I and satellite cities of key metropolitan areas are likely to attract stronger demand.
  • Occupiers are advised to focus on securing space in modern logistics facilities in locations with good transportation links, while investors are recommended to consider constructing greenfield developments in emerging hubs.

This report was originally published in https://apacresearch.cbre.com/en/research-and-reports/Mainland-ChinaBriefFocus-on-supply-chain-resilience-set-to-boost-industrial-and-logistics-real-estat

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REITs in 2022 appear well positioned to benefit from a sustained demand recovery, the inflation-hedging characteristics of real estate and attractive relative valuations.

Key takeaways:

  • We believe a strengthening economy should provide a healthy backdrop for many property types.
  • Real estate has historically performed well in inflationary environments despite potential interest rate increases.
  • REITs remain attractively valued compared with equities, suggesting room to grow.

Strong fundamentals supporting REITs

The global economic rebound of 2021, fueled by fiscal and monetary stimulus, economic reopenings and strong consumer spending, should provide a solid foundation for global real estate securities in 2022.

That said, supply-chain constraints and wage increases could temper growth and keep upward pressure on inflation, leading to rising interest rates. But while sharp increases in interest rates may unsettle markets in the near term, the direction of the economy and job growth tend to have a greater impact on REIT returns than rising rates.

In fact, an expanding economy typically drives stronger demand, which often leads to higher occupancy levels, giving landlords greater negotiating leverage to raise rents. Rising rents, in turn, have the potential to generate higher property cash flows, distributions and property values.

This report was originally published in https://www.cohenandsteers.com/insights/read/reits-forces-aligned-for-growth-in-2022

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The Q4 2021 Knight Frank Data Centre Report continues our growing coverage of the Asia Pacific region. Market analysis includes both established data centre hubs such as Singapore, Hong Kong, Mumbai, Sydney, Seoul, and Tokyo; and fast growth markets including Hanoi, Bangkok, Shanghai, and Kuala Lumpur – to provide the most wide-ranging view of the region.

The momentum of Q3 carried into the fourth quarter, with several major announcements across key markets in Asia Pacific. Total supply (live, phased, and under construction) in APAC increased almost 185MW in Q4, bringing total capacity in the region to over 7,900MW. Take-up was around 120MW, moderating slightly from Q3 but in line with previous quarters. For the whole of 2021, IT capacity across APAC grew by over 1,500MW.

The gigawatt markets of Tokyo and Shanghai added significant capacity in 2021, adding between 300MW to 400MW each, to their respective markets. In Q4, AirTrunk’s TOK1 facility opened in Tokyo, with its first phase up to 60MW. STT also announced its plan for two data centres in Inzai totalling 60MW. In addition, Stack Infrastructure’s has plans for a 36MW campus, and Colt has secured land for two sites in Inzai and Northern Tokyo for 45MW.

The Chinese authorities have announced the setting up of four mega clusters of data centres in the north and west of the country. This was followed by an announcement of a further 10 national data centre clusters as part of a broader strategy to transport data from eastern regions of China to western regions for storage and calculation. On the back of government plans to classify data centres as infrastructure assets for easier access to funding, India also saw several major new investments into data centre platforms, including Hiranani-Yotta and Kotak-Sify.

In Southeast Asia, Singapore lifted its hold on new data centre builds after a two-year moratorium. Under a new pilot program, up to 60MW of capacity will be made available in 2022, to developments of between 10 to 30MW each. As part of the consideration, applicants for new data centre facilities will need to commit to achieving a PUE of below 1.3 and obtain Singapore’s Green Mark for Data Centres-Platinum certification – in addition to adding strategic value for Singapore. We expect this pathfinder approach to serve as a model to other countries looking to find the right balance between their digitalization and sustainability goals.

Growing interest is also seen in emerging APAC markets like Seoul, Osaka, Ho Chi Minh, and Bangkok.

This article was originally published in https://www.knightfrank.com/

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The emergence of a fifth wave of COVID-19 in Hong Kong, together with continued strict border controls, has seen investors and corporations looking to adopt new strategies to manage the new normal in commercial real estate business operations.

In our Hong Kong Market Direction 2022 report, we highlight six factors we see impacting the future direction of the commercial real estate market in the Year of The Tiger:

  1. ESG Is Too Important to Be Ignored
  2. Bargain Hunting for Premium Office Properties
  3. Developers to Enrich Landbanks in the Northern Metropolis
  4. Automation and Warehouses are Connecting
  5. Healthy Lifestyles to Forge New Demand for Fitness Centers
  6. Growing Needs for Quality Virtual Conferencing and Collaborative Workspaces
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