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Overview

Asia Pacific equities declined by close to 5% in July to surrender all its gains this year, weighed down by the Chinese government’s regulatory crackdown on the education, internet and property sectors. The tech heavy total return index, as tracked by MSCI, fell to its lowest since November last year.  While property related counters were not spared, it fared relatively better as the region’s REITs, with a more diverse geographical base, supported real estate indices. Risks were also firmly on the downside as the rapid rise in infections intensified in the region, clouding the prospects of an economic recovery. The Fed’s decision to maintain interest rates at near zero was largely priced in but the lack of any clear conviction to taper its bond purchases propped up markets, indicating that a monthly pace of US$120 billion will be maintained until substantial further progress had been made on employment and inflation.

Listed Real Estate

The wider GPR/APREA Listed Real Estate tumbled in July, as double-digit declines notched by regional heavyweight, China, proved too much of a drag. Hong Kong stocks were not spared. Support from the region’s other major markets of Australia and Japan were scant this time round as the resurgence of infections in the region hit sentiment.

India’s stocks, however, bucked the regional trend to rise by over 8%. A steady dip in Covid-19 cases rising vaccination rates and relaxation of curbs boosted sentiment on Indian stocks. The pandemic, which have underscored the importance of homes amid the remote working trend, leading to a rise in the demand for apartments, as buyers hunted for upgrades. Favourable regulations, such as RERA and the Model Tenancy Act, and the lowest home loan interest rates in years as well as stamp duty reductions in certain states also fueled a rally for the country’s realty stocks.

REITs

Asia Pacific REITs rose in July, with the GPR/APREA Composite REIT Index building on its rally to record a ninth consecutive monthly rise; the benchmark rose above its January peak last year for the second month running. As expected, the resurgence in infections has boosted the Industrial sector to register another strong month while Retail made up the negative end of the spectrum. Regionally, industrial and logistics REITs are outperformers as investors continue to pursue a flight-to-safety trend.

Across markets, gains were registered by most of the regional heavyweights, with Singapore leading the pack. Rapidly increasing vaccinations rates on the island have provided visibility to the government’s plans to gradually open its economy. However, Australian REITs declined as the renewed lockdown in several cities snapped a four-month winning streak for the country.

Meanwhile, Filinvest REIT Corp is set to become the third REIT to list in the Philippines, having set the final subscription price for its IPO at PHP7.00 per share. The stock is slated to debut on the Philippine Stock Exchange by mid-August. The region continues to boast an impressive pipeline of potential REIT listings, with 8-10 expected for the rest of the year.

Outlook

As base effects wane, rising caseloads across several countries in the Asia Pacific have dimmed the outlook for the regional economy. However, REITs have continued to remain resilient, backstopped by the Industrial sector as well as markets that have progressively clocked higher vaccination rates which will make the easing of restrictions more tenable. With long-dated treasury yields at their lowest since February, markets are now more inclined to believe that the specter of surging inflation will be less likely for now. The state of play has clearly shifted to policy risks in China as well as the threat from the fast-moving Delta variant. With central banks and the Fed likely to stick with its easy monetary policies due to a choppy recovery, there will invariably be sustained interest in dividend-rich stocks. As long as the pandemic continues to linger, investors will also continue to seek out the structural plays of the industrial and logistics sectors.

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Using data to do more with less

Source: Yardi white paper

As investors sharpen their focus on sustainability, how do real estate companies respond? Yardi’s regional director Bernie Devine takes stock.

As the Intergovernmental Panel on Climate Change warns that we are now in the decade of decarbonisation, pressure is mounting for lagging economies and companies to step up, and for leaders to make even larger strides towards net zero emissions.

Seventy per cent of the world’s economies, representing two thirds of global carbon emissions, have made strong commitments to carbon neutrality, says the UN, and a third of the world’s assets are moving towards net zero by 2050 through the Net Zero Asset Owner Alliance.

Meanwhile, the Climate Bonds Initiative has tracked US$1.2 trillion of green bonds, and GRESB has recorded a 22 per cent increase in real estate companies disclosing their environmental, social and governance (ESG) achievements in just one year.

Despite the signals sounding loud and clear, sustainability is “still stuck off to the side of business process and reporting, rather than front and centre,” observes Yardi’s regional director, Bernie Devine.

Devine sees a similar scenario playing out across the Asia Pacific.

“The investment manager receives a query about sustainability and funnels it off to the ESG team to answer. This immediately tells me two things. Firstly, that the investment manager doesn’t know the answer; and secondly that the sustainability team is not central to the investment management process.”

Yardi’s latest whitepaper, Using data to do more with less, outlines five steps for real estate companies to take on the road to sustainability. It includes insights from Goodman Group’s chief financial officer, Nick Vrondas, and co-founder of Seoul-based Reimagining Cities, Chunga Cha.

While the report suggests strategies that real estate companies can adopt to capture the right data for better decision making, Devine warns that many business systems need an entire rethink.

“Spreadsheets won’t solve the sustainability challenge,” he says, noting that 58 per cent of real estate companies across the region remain reliant on Microsoft Excel to manage leasing, sales and property management information.

Much like security-by-design is embedded into software, business processes must be redesigned with sustainability at the core, Devine suggests.

“The real estate sector understands it must put the customer at the centre of its mission. To that I would add, if your objective is customer satisfaction, sustainability is central. The goal must be sustainable customer relationships through sustainable outcomes.”

Yardi helps real estate companies to complete sustainability assessments, manage ESG data and advance ESG performance. Download Yardi’s latest white paper: Using data to do more with less.

This article was first published in Property Council of Australia.

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  • The total strata office transaction volume climbed steadily to 162 units in the first half of 2021, up from 134 in H2 2020 and 79 in H1 2020. Cautious optimism on Singapore’s growth outlook, as well as investor interest in possible strata office buildings collective sales and from owner-occupiers, boosted sales volume.
  • While the number of strata offices sold in H1 2021 jumped by a noteworthy 20.9% on a half-yearly basis, total transaction values increased 106.6% in the same period to S$691.5 million (excluding the collective sale of Maxwell House). This surpassed all previous half-yearly transaction values that hovered below S$600.0 million since H1 2015.

To know more about the report, download it below.

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

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This report provides insights to investors into real estate transactional volumes as well as the emerging trends and opportunities in the Asia Pacific commercial real estate markets. So far, we’ve received very good feedback about the report’s content from our audience.

Some key takeaways of the report:

  • APAC real estate investment markets are on an upswing following a progressive recovery in the world’s economies since the beginning of the year
  • Transaction volumes across the region surged to new heights in H1 2021, up 28% compared to H1 2020, totalling a new record of USD103 billion
  • The industrial and logistics markets across APAC are the fastest-recovering sectors, registering 70% growth year-on-year in H1 2021
  • Asset dispositions by the APAC PE funds in the years to follow will bring more investment opportunities for investors
  • REITs are garnering investor interest with a recovery in market pricing and potential IPOs on the cards
  • Large-scale redevelopment strategies will support buy-side demand ahead
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COVID-19 induced lockdowns have exposed the weaknesses of income-producing properties around the world. As a result, two-tiered markets have formed, with more resilient prime assets continuing to hold their values, while non-prime assets are seeing their values deteriorate. In response to this, we are witnessing massive moves to repurpose assets and bring them to relevance in the evolving landscape across the region.

There are five demand drivers consisting of both the pull and push factors influencing the Great Asset Repurposing of the Decade.

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

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“Despite operating under the shadow of the pandemic, warehouse markets across the region have remained largely stable, driven by sustained demand from the e-commerce sector. Recent events that have impacted commitments to customers have put the development of supply chain resilience into focus and major occupiers are responding by re-configuring their strategies through building out inventory buffers and expanding urban distribution nodes. This will have positive knock-on effects for demand to strengthen for logistics spaces. Developers in the region remain on the hunt for opportunities to capitalise on growth trends, indicating sustained confidence in the region’s warehouse markets.”

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The ongoing recovery in key property markets across Asia Pacific continued in the second quarter of 2021 and looks set to sustain through the second half, aided by strong demand for commercial assets from end-users as well as investors.

In China, a total of 30 deals were finalised across major markets, as both domestic and foreign market participants sought to acquire key assets across property segments. Korea continued to witness record-high unit prices for prime office space in Seoul, and Japan’s property markets remained buoyant in the face of stringent restrictions. In Singapore, investment activity was dominated by the privatisation of REITs, while in India, global private equity (PE) firms and developers made significant acquisitions in metro markets. Taiwan witnessed a surge in demand for commercial property from manufacturers on the back of strong export growth. In the Philippines, e-commerce companies and outsourcing firms took up space in data centres while healthcare and logistics companies should lead office take-up in the coming months. Thailand’s office market remained stable though its troubled hospitality industry could see higher transaction levels as beleaguered owners look to sell assets. We also expect to see more joint ventures between Thai and international investors across sectors. In Indonesia, the residential sector is expected to receive a boost from the extension of a tax waiver while urban mixed-use projects in the capital, Jakarta, received an influx of foreign funds as investors bet on a speedy post-COVID-19 recovery.

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One of the four core APREA services together create synergy for sustainable growth of members across the region:

Advocacy through:

  • Sustaining effort to proactively and strategically engage with policymakers across Asia Pacific
  • Ensuring long-term growth of the securitised real assets sector in Asia Pacific
  • Promoting employment, economic growth and a sustainable environment among stakeholders
  • Harmonising industry standards especially in reporting transparency and sustainability

Read on for the full updates from our 2021 Q2 Advocacy Bulletin Updates which includes the following items: 

• NDRC has made a new announcement for China Infrastructure REITs on 2 July
• India’s SEBI reduces the trading lot size for REIT and InvITs to enhance liquidity
• Greater Sydney Construction Activity Pause
• Grant scheme for OFCs and REITs in Hong Kong
• SGX launches world’s first ESG Reit derivatives
• Singapore Land Betterment Charge Act 2021
• Implications of the G-7 Global Minimum Corporate Tax for Singapore
• Extension to Temporary Relief Measures for Property Sector due to Coronavirus Disease 2019 (COVID-19) Pandemic
• Refinements to Criteria for Publicly Listed Housing Developers with Substantial Connection to Singapore to be Exempted from Qualifying Certificate Regime

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尽管新冠疫情前景尚未完全明朗，其对亚太地区写字楼租户的干扰正在减少。在灵活办公和新型工作模式日益普遍的趋势引导下，区域内企业已经在重启对不动产策略的长期规划。

针对“新常态”之下的写字楼发展和企业租户的应对措施，CBRE世邦魏理仕于5月启动了《未来的办公场所——2021年亚太区写字楼租户调查》，并于近期发布调查结果，确立了“区域内经济稳步复苏”、“企业不动产组合规模增长预期提高”、“混合办公趋势上升”、“未来的工作场所将更重视促进沟通与协作”、“企业将实施更具灵活性的工作场所设置”等五个主要的写字楼趋势。

该项针对亚太区各地不同行业写字楼租户的调查发现，大部分（71%）受访企业都认为企业经营环境正持续改善，这一比例显著高于2020年4月（22%）与10月（48%）的两次调查结果。其中，大中华区和太平洋地区受访企业的市场信心水平最高，而印度和东南亚地区企业对市场的乐观程度则相对较低。

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Overview

Stock markets dived in mid-June when the US Fed indicated possible quantitative tightening and a potential interest rate hike by 2023, as investors remained jittery of rising inflationary pressures and its implications on monetary policies. The region’s equity market also fell on concerns amid the strengthening greenback. Further weakness was also evident as the resurgence of outbreaks, which had governments reviving restrictions across several economies, threatened to derail recovery momentum in the region. However, property stocks across the region largely bucked the trend, underpinned by accommodative monetary conditions and sustained interest in dividend-rich stocks amid a yield-starved environment.

Listed Real Estate

Despite outperforming the region’s equities, June was another tepid month for non-REIT real estate stocks in the region with the wider GPR/APREA Listed Real Estate Composite barely staying in positive territory. In a repeat of May, gains in Australia, Hong Kong and Japan just managed to offset caution in the other regional heavyweights of China and Singapore. China’s real estate stocks underperformed for a third month running as policy overhang continued to plague sentiment, with policymakers moving to restrict credit growth and stepped up interventions in markets.

Hong Kong’s shares continued to maintain its positive run, driven by a notable pickup in property sales and prices as well as optimism surrounding it e-voucher scheme, which is designed to boost local consumption. Blackstone’s HK$23.7 billion bid for HKSE-listed Soho China also signaled sustained investor interest. Stocks in India also gained as the country’s central bank continued to maintain  interest rates at record lows.

REITs

The GPR/APREA Composite REIT Index finished strongly in June, outperforming regional equities both in June and for the second quarter. While renewed infection surges could have spurred interest in safe-haven Industrial REITs, the gains were broad based with even the risk-on sectors registering gains. A weakened Japanese yen during the period also spurred investments into J-REITs. Separately, the prospects of an eventual re-opening of its economy and borders supported the performance of Hong Kong REITs.

China’s first batch of REITs made a rousing stock market debut  registering initial gains, as the nine listed REITs – five in Shanghai and four in Shenzhen – drew interest from Chinese retail investors. The nine REITs reportedly raised over RMB30 billion with its retail tranches 10-times over subscribed. For now, C-REITs are backed only by infrastructure assets and offered as units in a fund. But the trial will be closely watched – the success of which could eventually seed measures for further liberalization.

Meanwhile, the Philippine REIT pipeline remains on track. Hot on the heels of Filinvest’s planned third quarter debut of its REIT, the country’s largest office landlord – Megaworld – is looking to unveil the nation’s largest offering that is seeking to raise as much as PHP27.3 billion. Data centre giant, Digital Realty Trust, is also considering an offering in Singapore that could raise up to US$400 million which could come as early as this year. The share sale would tap growing investor interest in data centres. The region’s expanding REIT universe is continuing apace with up to 10 new listings that could occur in the second half of the year.

Outlook

While inflationary pressures will continue to introduce volatility, monetary conditions are expected to remain loose as central banks remain cognizant that an economic recovery remains far from certain. Investors are also choosing to remain focused on the longer term. Countries in the region are now training their sights on increasing vaccination rates, raising the prospects of an accelerated re-opening of its economies. Institutional interests in the region’s commercial real estate have continued to be robust, as investors, awakened by prospects of more favourable entry prices especially in gateway markets, chase deals. The region’s REITs, in the first six months of the year, have returned close to 9.0% to overtake equities, indicating a gradual reversion to long-run fundamentals.

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