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  • Global commercial real estate (CRE) investment volume fell by 31% year-over-year in Q1 2021. A strong rebound is expected in the second half of the year on the back of economic recovery and widespread COVID-19 vaccinations.
  • The pandemic has affected global investment markets to varying degrees. APAC led the global investment recovery in Q1. Markets like Tokyo, Seoul and Beijing showed resilience throughout the pandemic. Markets in North America, led by Los Angeles, Boston and Dallas, have recovered rapidly, while European markets lagged due to COVID resurgences.   
  • Industrial property investment remained strong in all three global regions. Hotel investment gained traction in the U.S. as prices dropped and distressed sales came to market. Core office and retail assets held up well in Asia Pacific.
  • Yield spread between property and bond narrowed based on rising bond yields across global markets. Global industrial yield continued to compress driven by strong market fundamentals and demand. Office yield remained stable in Q1 but showed signs of expansion in the U.S. Retail yield edged higher driven by softness in Europe.
  • Real estate total return remained positive in 2020 thanks to a stable income return. Many investors are turning to opportunistic and distressed investment in 2021 for higher returns. Greater emphasis is placed on tenant credit and rent roll growth under the influence of the pandemic.
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Although substantial questions remain about the future of the workplace, it is becoming increasingly clear that a focus on the office as the sole place where work is done is no longer applicable and that there is actually an ecosystem of workplaces.

Facilities Management (FM) needs to adapt and evolve accordingly. There are already changes in the way corporate offices are managed; that transformative approach will need to continue and soon expand to also consider locations that not the office. 

From our collective experience across the globe – best practices developed through trial & error, solutions we have implemented for clients, data collected and analysed – we identify what has significantly changed, what emerging trends we see, and what’s next within facilities management across three core areas: 

  • health and safety; 
  • technology and innovation; and
  • culture and experience. 
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A Comprehensive Take on Major Transit-Oriented Infrastructure Projects with Key Impact Markets

Bengaluru is one of the major economic growth engines of India. It contributes more than one-third to Karnataka’s Gross State Domestic Product and is a major driver for job creation in the state. Apart from earning the age-old moniker of being India’s IT capital, it is now the start-up capital of India and a leading fintech hub. Owing to the huge economic opportunities, job creation and projected population increase from 11.69 million in 2011 to 16.48 million by 2021, the need to expand and upgrade the Bengaluru Metropolitan Region’s (BMR)’s infrastructure and public services has never been as pronounced as it is now. Particularly, the urban mobility infrastructure.

The ‘Bengaluru Urban Infrastructure Report 2020 –A comprehensive Take on Major Transit Oriented Infrastructure Projects and Key Impact Markets provides an insight into the aforementioned transport infrastructure projects. The report analyses their impact on the real estate market in terms of locations that will see increased real estate traction due to mounting demand. We have looked into the role that regulatory interventions and systematic execution of planned transport infrastructure plays, alongside the organic development of the city. While the debate on urban infrastructure has moved beyond transport and on to other factors that affect the sustainability of the environment and impact air and water, transport infrastructure remains a prominent factor that affects the real estate market.

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Despite experiencing four waves of COVID-19 outbreaks and its economic worse performance on record, Hong Kong is poised for further growth. Given a sharp rebound of GDP by 7.9% in Q1 2021, and a forecast of 3.5-5.5% growth for 2021, the commercial real estate market stands out with a positive outlook while adjusting to some “new normals”

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Customer expectations, advancing technology and a burgeoning build-to-rent sector are encouraging the best residential landlords to boost their “digital kerb appeal”, says Yardi’s Paul Yount.

Yount, Yardi’s industry principal and product manager for RENTCafé, says renters no longer expect to spend their Saturdays pounding the pavement or filling in dozens of rental application forms.

“We know many apartment hunters prefer online interactions, and 14 per cent of today’s apartment renters are willing to sign a lease without even seeing the property in person,” he says.

The explosion of ecommerce in recent years has driven an evolution in customer expectations. If a customer can expect a fast and frictionless experience when they make a purchase online, why wouldn’t they expect the same experience when choosing their next apartment?

“Physical kerb appeal has always been important in real estate. But now digital kerb appeal is more important,” Yount explains.

Virtual tours, a phenomenon already gathering speed before COVID-19, are now the preferred way for renters to select their next apartment, Yount adds. He points to a Yardi survey of RENTCafé users which found nearly a third (31%) preferred self-guided tours or had no preference, pre-COVID.

“Now, most renters would prefer a self-scheduled tour in their next apartment search – in fact 83 per cent of apartment shoppers tell us they’d prefer to take a self-guided tour if one was available.”

Yardi’s research is backed up by the largest survey of apartment residents, undertaken by the National Multifamily Housing Council in the United States. This survey, which got inside the minds of 372,000 apartment residents in 2020, found:

  • 100% would prefer to engage with a mobile app rather than a website
  • 90% want to make an individual apartment selection online and
  • 81% want videos of apartment models and amenities.

The appeal of self-guided tours, powered by Yardi’s technology, is not just about social distancing. Two thirds of renters want to tour a property at their own pace, and just under half want to check out a property after hours.

Does that mean today’s renter prefers a high-tech experience over a high-touch, personalised approach? Yount compares the expectations of today’s renter with that of a grocery shopper.

“Some people like old-school checkouts, others prefer self-checkout, some like kerbside pickups while others opt for delivery services. Today’s consumer wants to do business in a lot of different ways.”

So, what are Yardi’s top three high-tech, high-touch plays to build loyalty and create long-term connections with renters?

Download Yardi’s latest paper to find out.

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  • By April 2021, office-focused listed real estate companies became the worst-performing segment in the MSCI World Core IMI Real Estate Index, on a cumulative basis since January 2020.
  • Office’s relatively poor recent performance upset the pattern of returns — across regions and public and private markets — seen in 2020, when industrial outperformed, retail and hotels lagged and office and residential had middling returns.
  • Private-market data has not shown such a shift in sector-performance rankings but, looking deeper, we can see the performance of office assets has varied by location type and lease structure.

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As China benefits from being “first in and first out” of the COVID-19 pandemic, it has become increasingly attractive to investors both locally and from around the globe. In response, as a joint effort of our Research, Valuation and Capital Markets teams, in late 2020 we conducted an investor intentions and cap rate expectations survey, collecting valuable responses from mainland China’s largest commercial real estate (CRE) investors, both domestic and international.

The survey results revealed strong investor interest in China’s Tier 1 cities – especially in office assets in Beijing and Shanghai, as well as growing interest in business parks. Investor interest in retail assets also remained relatively solid, driven by China’s rapid recovery from the pandemic. Not surprisingly, the majority of survey respondents also demonstrated interest in logistics and data centers in Tier 1 and surrounding satellite cities. Among the major Tier 2 cities, Hangzhou – China’s rising tech city and provincial capital city of Zhejiang, emerged as the top choice, followed by Chengdu.

In terms of cap rate expectations, cap rates for CBD office properties in Beijing and Shanghai will likely remain low in 2021, ranging between 3.9% and 4.6%. In contrast, office cap rates in Shenzhen and Tier 2 cities are expected to rise slightly. For retail investments, cap rates are expected to stay relatively steady in Shanghai, Guangzhou and the major Tier 2 cities, while an uptick in cap rate is likely in Beijing and Shenzhen. In addition, cap rates of business park properties are anticipated to remain stable across all major cities in China, while most respondents expect further compressions in cap rates of logistics facilities and data centers in and around Tier 1 cities.

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– The vacancy rate for Large Multi-Tenant (LMT) logistics facilities in the Greater Tokyo area rose by 0.6 points q-o-q to 1.1% in Q1 2021, marking the first time the vacancy rate has exceeded 1% since reaching 1.1% in Q4 2019. Although the unprecedented surge in demand for facemasks and other daily necessities triggered by the COVID-19 pandemic led to stronger competition for logistics space in 2020, activity now appears to have eased.  That said, overall demand remains stable.

– The LMT vacancy rate in the Greater Osaka area fell to 1.9% in Q1 2021, down 1.8 points q-o-q. This marked the first time the vacancy rate has dropped below 2% since Q2 2016, when it also stood at 1.9%. The fact that rents have risen by 13% over the past two years, combined with increasing uncertainty over future economic performance, has meant that tenants are becoming more cautious, slowing the pace of rent increase.

– The LMT vacancy rate in the Greater Nagoya area fell by 1.7 points q-o-q to 8.6% this quarter. With some 170,000 tsubo of new floor space coming available in 2022, owners are stepping up their promotional campaigns to attract tenants.

– This quarter, CBRE has initiated the publication of LMT indices for the Greater Fukuoka area, where the vacancy rate has remained at 0.0% since Q2 2019. With development of multiple new LMT facilities now underway, properties possessing more user-friendly layouts will command an advantage over the competition.

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  • Industrial GVA was negative at -6.7% Q4 2020.
  • Average super prime industrial rents were up 0.4% across the quarter. Australian super prime rents average $113/sqm
  • Super prime yields have compressed by 57 bps y-o-y resulting in record low yields
  • Land values for 1.6ha lots increased by 2.5% q-o-q averaging $570/sqm while 0.25ha lots increased by 5.4% q-o-q to $719/sqm.
  • Transaction volumes. Transaction volumes above $5m totalled $393m across 18 transactions. This is 78% down on volumes recorded in Q1 2020.
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  • Investment sentiment has improved since the abolition of double stamp duty in November 2020.
  • Property funds accounted for 33% of investment volume in Q1 2021, including half of the ten largest deals.
  • Industrial transactions represented 43% of total investment volume, the highest proportion since Q4 2005.
  • CBRE expects new standard rates for lease modification for industrial redevelopment to boost investment in the sector this year.
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