Cushman & Wakefield – The Signal Report: Global Guide to CRE Investing
Cushman & Wakefield’s 2022 Signal Report shows that recovery in all regions and sectors of the global real estate market will hit a new record in 2022. In this global report, our Global Head of Capital Markets Insights and Head of Investment Strategy for EMEA Capital Markets provide a quarter-by-quarter guide to investments in Commercial Real Estate (CRE) in 2022.
Key Takeaways:
1. Activity in the global real estate market hit a new record in 2021 with a stunning Q4 that drove an annual increase of 55%. Demand will be just as strong this year and while rising rates, geopolitical tensions and finding the right opportunities will remain an issue, activity in the first half of the year could yet exceed 2021 and a 3% uplift is forecast for the year overall.
2. Uncertainty will add to the weight of money targeting liquid, core safe-haven markets but could also somewhat delay the rise in interest rates so widely expected and feared in the market. What is more, this comes against a still favorable backdrop for real estate in terms of the dynamics of investor demand and the structural shifts driving the need for more or different space.
3. The occupier market’s recovery will be slowed by uncertainty and the persistence of COVID-19, but in no way stopped. Indeed, while capital markets are leading the recovery, occupiers will be driving performance as economic activity, jobs growth and a focus on talent and innovation drive the imperative to get real estate right, resulting in renewed demand, rent inflation and further disparity between good and average assets.
4. What constitutes the “right asset” is evolving due to structural changes within technology and talent, as well as a brighter spotlight on ESG considerations. Many older assets are still relevant however and much of what worked pre-pandemic will still work as market health returns.
5. Inflation will continue to pressure global interest rates, though markets have already priced in significant monetary tightening. While the yield gap is closing, real estate will remain attractive thanks to its relative income and potential for the right assets to act as an inflation hedge.
6. A return to the old normal is not apparent and the shift from the pandemic is slower than anticipated due to the Omicron variant and the fact that businesses are taking advantage of this time to rethink how they operate and use space.
7. Sheds, beds, meds and niche assets will see a further increase in allocations – growing from a position of immaturity in some regions – while more traditional sectors offer a key route to access stock due to scale. However, investors must approach all sectors via a range of structures and capital routes to find opportunities and take advantage of all performance potential.
8. As a result of new user patterns and a demand for greater sustainability, reworking existing stock and building more effectively will be a priority – and an opportunity – on a global basis, especially in core markets with less focus on ESG to date.
9. The longer-term redesign of supply chains will refocus demand in all regions as well as capitalize on growth in low-cost emerging markets globally.
To address climate change, leading real estate funds and companies around the world are setting decarbonization and net-zero targets. These targets can differ widely and consist of many elements, and some may be more credible than others. In this report — which builds on our net-zero report for companies, “Breaking Down Corporate Net-Zero Climate Targets” — we outline an approach for evaluating real estate funds’ and companies’ decarbonization and net-zero targets. It aims to help the industry set net-zero commitments, as well as support asset owners in evaluating decarbonization targets of companies and funds they invest in. It argues that best practices for decarbonization and achieving net-zero are:
Comprehensive: Include all significant sources of emissions, even those that may be hard to quantify, including Scope 3 emissions from tenant-controlled energy use and development activities.
Ambitious: Pursue absolute reductions in the short and long term, in line with accepted, science-based pathways.
Feasible: Demonstrate progress toward goals, supported by a robust business strategy
The Power of Deep Reinforcement Learning to Transform the Built Environment
What can Artificial Intelligence (AI) offer the built environment in our age of climate emergency? At the heart of Deep Reinforcement Learning is an agent and an environment. Just as we are starting to learn that our actions within our environment have consequences on an immense, planetary scale, innovative AI is learning too – and faster than us.
By using Deep Reinforcement Learning to optimise the energy efficiency of HVAC systems in the built environment, we can minimise the negative impact of our own actions without sacrificing occupant comfort. As businesses all over the world attempt to transition to Net Zero, this technology has a pivotal role to play.
But why is Deep Reinforcement Learning the best way to optimise HVAC performance?
REITs and InvITs – Financing urbanization and infrastructure in India: A comprehensive insight
Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are conceptually like mutual funds in that funds are raised (backed by a sponsor) from institutional and retail investors which is then invested in infrastructure or real estate projects. The income earned from such projects is periodically distributed (at least 90% of net distributable cash flows (NDCF)) to unitholders. However, unlike mutual funds, they also have characteristics of a business enterprise considering they also raise debt and through a Trustee and an Investment Manager, are actively involved in projects to maximize returns to unitholders.
The rising emergence and popularity of REITs/InvITs in India is a welcome development for capital thirsty sectors, e.g., infrastructure (roads and highways, ports, railways, etc.), power, real estate, etc. With a view to increasing private participation supported by favorable government policies (e.g., enabling investment by foreign portfolio investors) and long- term investment outlook, many marquee investors including sovereign and pension funds are continuing to raise their stakes in such assets. Investors benefit from generating regular cash distributions, stable yield and an opportunity for sponsor(s) to expand their asset base.
Knight Frank – Asia-Pacific Warehouse Review H2 2021
Take-up in the region’s warehouse markets remained robust in the second half of 2021, lifted by resurgent trade flows from the recovery in global demand. As a result, rents for logistics warehouses across Asia-Pacific rose by a marginal 0.5% year-on-year in the same period. Despite close to 9 million sqm of new supply expected to be delivered in the region in 2022, vacancies are likely to remain tight on strong demand and active pre-commitments.
APREA ADVOCACY BULLETIN: Vibrant Voice of Real Assets Q4 2021
Read on for the full updates from APREA’s Q4 2021 Advocacy Bulletin, which includes the latest industry and regulatory developments from Hong Kong, China, India, and Singapore.
Cushman & Wakefield’s Singapore Office Market Outlook 2022 Report
Following a strong recovery in office demand, reduced vacancies and growth in CBD Grade A office rents in 2021, the Singapore office market is expected to further pick up pace in 2022.
According to Cushman & Wakefield’s ‘Singapore Office Market Outlook 2022’ report, the projected economic growth of 3.6% in Singapore coupled with the positive economic outlook globally and regionally bode well for another robust office market this year, barring any unforeseen circumstances.
Environmental, Social and Governance (ESG) integration is no longer a choice today. In the global Race to Zero[1], led by UNFCCC, over 5,200 businesses, 1,040 cities and 440 investors have stepped up their ambition and joined the global alliance to catalyse climate change. Following COP26, over 90% of global GDP has committed to achieving net zero by or near mid-century.[2] According to the 17th Edition of the World Economic Forum Global Risks Report, environmental risks were perceived to be the five most critical long-term threats over the next 10 years.[3] Climate risks are investment and business risks – the damage caused by climate change is projected to result in an increase of up to 41% of global property premiums until 2040.[4] With the building and construction sector accounting for about 40% of global carbon emissions[5], the real estate sector is in a prime position to advance sustainable development.
Integration: Strong Fundamentals for Business and Climate Resilience
City Developments Limited (CDL)’s ESG strategy stems from its corporate ethos, “Conserving as we Construct” established in 1995. Its value creation business model is anchored on four key pillars—Integration, Innovation, Investment, and Impact; guiding CDL to achieve three key deliverables: “Decarbonisation”, “Digitalisation & Innovation” and “Disclosure and Communication”. The CDL Future Value 2030 sustainability blueprint, implemented in 2017, maps out clear strategic goals and ESG targets across CDL’s business strategies and operations.
CDL’s sustainability portfolio reports directly to the Board Sustainability Committee with ESG factors effectively integrated into its business, operations and growth strategy. In 2018, the CDL Group introduced its G.E.T. strategy—focusing on Growth while adopting an ESG lens, Enhancement of assets to drive operational efficiency and Transformation to deliver long-term and sustained value.
Innovation: Scaling up Sustainable Technologies for a Green Revolution
Recognising that innovation is a key accelerator of climate solutions, CDL set up a Green Building & Technology Application team in 2020. The team collaborates with the organisation’s Enterprise Innovation Committee, leveraging cutting-edge technology to reduce CDL’s carbon footprint in the way it designs, builds, and manages its assets.
To advance circularity solutions, CDL is studying the feasibility of advanced low-carbon construction methods and materials to reduce embodied carbon. To do this, CDL has ramped up on buildable designs moving towards less labour-intensive processes, and focuses on Integrated Digital Delivery and Design for manufacturing and Assembly (DfMA) technologies. Through this, CDL can reduce reliance on on-site workers, enhance workplace safety and health, and drive productivity improvements in construction and facility management.
CDL also capitalises on the power of cross-sector partnerships to develop low-carbon technologies. The company has partnered with the Solar Energy Research Institute of Singapore to pilot Building-Integrated Photovoltaics (BIPV) modules and panels at various developments. The pilot on Bifacial BIPV panels with prints at CDL’s Sustainability Academy aims to optimise aesthetic value whilst generating power.
CDL and SERIS piloted a new generation of PV art wall (bifacial BIPV panels) at the Singapore Sustainability Academy at City Square Mall in 2020. This serves as a testbed for more efficient PV Installations
In order to achieve a net zero world, zero energy buildings are the way forward. To date, CDL has built two net zero facilities using eco-friendly technologies—the Singapore Sustainability Academy (SSA) and the CDL Green Gallery at the Singapore Botanic Gardens. The SSA, a BCA Green Mark Platinum-certified building, is the first in Singapore to have its construction materials, Cross Laminated Timber and Glued Laminated Timber, verified by the Nature’s BarcodeTM system as coming from responsible sources.
The SSA is the first ground-up initiative and zero-energy facility in Singapore dedicated to capacity building and thought leadership for climate action. Since its opening in 2017, it has tapped on 3,200 sq ft of solar panels on its rooftop as its energy source. The entire facility is built with over 80% of structural materials that come from sustainable sources.
In February 2021, CDL became the first real estate conglomerate in Southeast Asia to sign on to the World Green Building Council’s (WorldGBC) Net Zero Carbon Buildings Commitment. At COP26, CDL was one of 44 pioneering companies to expand its commitment towards a net-zero whole life carbon-built environment. Through this commitment, CDL pledged net zero operational carbon by 2030 for its new and existing wholly-owned assets and developments under its direct operational and management control. This also entails a reduction in embodied carbon and compensating residual upfront emissions via offsetting for new developments by 2030 and for all buildings to be net zero carbon by 2050.
To move towards a low carbon economy, CDL has aligned itself with even more ambitious carbon emissions reduction targets that have been successfully assessed and validated by Science Based Targets Initiative (SBTi) in 2021, in line with a 1.5°C warmer scenario. CDL was the first Singapore real estate company to validate its targets by SBTi for a 2°C warmer scenario in 2018.
The CDL Green Gallery is built with several eco-friendly technologies, including two innovative features – the biomaterial known as Hempcrete (largely made from the hemp plant) and a prefabricated modular system.
Investment: Building Leverage for the Future via Sustainable Finance
CDL’s Republic Plaza Green Bond was the first green bond issued by a Singapore company in April 2017.
CDL has secured more than $3 billion worth of sustainable finance, in the form of various green loans, a green bond, and a sustainability-linked loan, to help accelerate its green building action. It takes pride in issuing the first green bond by a Singapore company in 2017, which has helped to tap into alternative financing streams. In September 2021, CDL secured a discount for the SDG Innovation Loan provided by DBS Bank Ltd, for its successful R&D and pilot of digiHUB. This enabled CDL to be the first Singapore entity to achieve a discount on a sustainability-linked loan through the adoption of an innovative project that supports the SDGs on a large-scale basis.
At CDL’s mixed-use development South Beach, PV panels have been installed at the tower roof and louver modules, covering a total area of approximately 1,800 m2.
What gets measured gets managed—CDL’s longstanding experience in ESG disclosure and sustainability has helped it identify gaps and improve its ESG performance. Its robust ESG integration and disclosures are widely recognised by 13 global ratings, rankings and indexes, including double ‘A’s in the 2021 CDP Global A List for corporate climate action and water security.
CDL is honoured to have achieved its best performance in the Corporate Knights’ 2022 Global 100 Most Sustainable Corporations in the World, jumping from 40th place in 2021 to 5th position this year. In addition, it has maintained its ranking as the world’s top real estate management and development company and Singapore’s top sustainable company for the fourth consecutive year, and has been the first and only Singapore company to be included in the renowned index for 13 consecutive years.
The race to zero requires conviction and engagement with all stakeholders. After two decades of integrating ESG into our business, we have captured growth opportunities while mitigating ESG risks, enhancing value for our investors, communities, and the planet.
Environmental, Social and Governance (ESG) integration is no longer a choice today. In the global Race to Zero[1], led by UNFCCC, over 5,200 businesses, 1,040 cities and 440 investors have stepped up their ambition and joined the global alliance to catalyse climate change. Following COP26, over 90% of global GDP has committed to achieving net zero by or near mid-century.[2] According to the 17th Edition of the World Economic Forum Global Risks Report, environmental risks were perceived to be the five most critical long-term threats over the next 10 years.[3] Climate risks are investment and business risks – the damage caused by climate change is projected to result in an increase of up to 41% of global property premiums until 2040.[4] With the building and construction sector accounting for about 40% of global carbon emissions[5], the real estate sector is in a prime position to advance sustainable development.
Integration: Strong Fundamentals for Business and Climate Resilience
City Developments Limited (CDL)’s ESG strategy stems from its corporate ethos, “Conserving as we Construct” established in 1995. Its value creation business model is anchored on four key pillars—Integration, Innovation, Investment, and Impact; guiding CDL to achieve three key deliverables: “Decarbonisation”, “Digitalisation & Innovation” and “Disclosure and Communication”. The CDL Future Value 2030 sustainability blueprint, implemented in 2017, maps out clear strategic goals and ESG targets across CDL’s business strategies and operations.
CDL’s sustainability portfolio reports directly to the Board Sustainability Committee with ESG factors effectively integrated into its business, operations and growth strategy. In 2018, the CDL Group introduced its G.E.T. strategy—focusing on Growth while adopting an ESG lens, Enhancement of assets to drive operational efficiency and Transformation to deliver long-term and sustained value.
Innovation: Scaling up Sustainable Technologies for a Green Revolution
Recognising that innovation is a key accelerator of climate solutions, CDL set up a Green Building & Technology Application team in 2020. The team collaborates with the organisation’s Enterprise Innovation Committee, leveraging cutting-edge technology to reduce CDL’s carbon footprint in the way it designs, builds, and manages its assets.
To advance circularity solutions, CDL is studying the feasibility of advanced low-carbon construction methods and materials to reduce embodied carbon. To do this, CDL has ramped up on buildable designs moving towards less labour-intensive processes, and focuses on Integrated Digital Delivery and Design for manufacturing and Assembly (DfMA) technologies. Through this, CDL can reduce reliance on on-site workers, enhance workplace safety and health, and drive productivity improvements in construction and facility management.
CDL also capitalises on the power of cross-sector partnerships to develop low-carbon technologies. The company has partnered with the Solar Energy Research Institute of Singapore to pilot Building-Integrated Photovoltaics (BIPV) modules and panels at various developments. The pilot on Bifacial BIPV panels with prints at CDL’s Sustainability Academy aims to optimise aesthetic value whilst generating power.
CDL and SERIS piloted a new generation of PV art wall (bifacial BIPV panels) at the Singapore Sustainability Academy at City Square Mall in 2020. This serves as a testbed for more efficient PV Installations
In order to achieve a net zero world, zero energy buildings are the way forward. To date, CDL has built two net zero facilities using eco-friendly technologies—the Singapore Sustainability Academy (SSA) and the CDL Green Gallery at the Singapore Botanic Gardens. The SSA, a BCA Green Mark Platinum-certified building, is the first in Singapore to have its construction materials, Cross Laminated Timber and Glued Laminated Timber, verified by the Nature’s BarcodeTM system as coming from responsible sources.
The SSA is the first ground-up initiative and zero-energy facility in Singapore dedicated to capacity building and thought leadership for climate action. Since its opening in 2017, it has tapped on 3,200 sq ft of solar panels on its rooftop as its energy source. The entire facility is built with over 80% of structural materials that come from sustainable sources.
In February 2021, CDL became the first real estate conglomerate in Southeast Asia to sign on to the World Green Building Council’s (WorldGBC) Net Zero Carbon Buildings Commitment. At COP26, CDL was one of 44 pioneering companies to expand its commitment towards a net-zero whole life carbon-built environment. Through this commitment, CDL pledged net zero operational carbon by 2030 for its new and existing wholly-owned assets and developments under its direct operational and management control. This also entails a reduction in embodied carbon and compensating residual upfront emissions via offsetting for new developments by 2030 and for all buildings to be net zero carbon by 2050.
To move towards a low carbon economy, CDL has aligned itself with even more ambitious carbon emissions reduction targets that have been successfully assessed and validated by Science Based Targets Initiative (SBTi) in 2021, in line with a 1.5°C warmer scenario. CDL was the first Singapore real estate company to validate its targets by SBTi for a 2°C warmer scenario in 2018.
The CDL Green Gallery is built with several eco-friendly technologies, including two innovative features – the biomaterial known as Hempcrete (largely made from the hemp plant) and a prefabricated modular system.
Investment: Building Leverage for the Future via Sustainable Finance
CDL’s Republic Plaza Green Bond was the first green bond issued by a Singapore company in April 2017.
CDL has secured more than $3 billion worth of sustainable finance, in the form of various green loans, a green bond, and a sustainability-linked loan, to help accelerate its green building action. It takes pride in issuing the first green bond by a Singapore company in 2017, which has helped to tap into alternative financing streams. In September 2021, CDL secured a discount for the SDG Innovation Loan provided by DBS Bank Ltd, for its successful R&D and pilot of digiHUB. This enabled CDL to be the first Singapore entity to achieve a discount on a sustainability-linked loan through the adoption of an innovative project that supports the SDGs on a large-scale basis.
At CDL’s mixed-use development South Beach, PV panels have been installed at the tower roof and louver modules, covering a total area of approximately 1,800 m2.
What gets measured gets managed—CDL’s longstanding experience in ESG disclosure and sustainability has helped it identify gaps and improve its ESG performance. Its robust ESG integration and disclosures are widely recognised by 13 global ratings, rankings and indexes, including double ‘A’s in the 2021 CDP Global A List for corporate climate action and water security.
CDL is honoured to have achieved its best performance in the Corporate Knights’ 2022 Global 100 Most Sustainable Corporations in the World, jumping from 40th place in 2021 to 5th position this year. In addition, it has maintained its ranking as the world’s top real estate management and development company and Singapore’s top sustainable company for the fourth consecutive year, and has been the first and only Singapore company to be included in the renowned index for 13 consecutive years.
The race to zero requires conviction and engagement with all stakeholders. After two decades of integrating ESG into our business, we have captured growth opportunities while mitigating ESG risks, enhancing value for our investors, communities, and the planet.
Cushman & Wakefield’s Asia Pacific Office Fit-Out Cost Guide 2022
Cushman & Wakefield’s Office Fit-out Cost Guides provide an indication of the fit-out construction costs for occupiers across key cities around the world. Whether it’s a basic, collaborative, or advanced hybrid fit-out requirement, these Guides compiled by our Project & Development Services team serves to assist occupiers in defining their capital planning and relocation budgets.
The Guides include a comprehensive fit-out cost section covering furniture, professional fees, mechanical & electrical works, construction works, audio visual/IT and other miscellaneous costs, as well as reinstatement and retrofit costs.
Estimated costs provided in our Guides are indicative of market averages based on certain assumptions. Exact costs for specific projects may differ to those presented – we recommend engaging a Project & Development Services professional to advise on precise costings based on your unique construction requirements.
Asia Pacific Guide 2022 Highlights
One clear factor that has come out of the COVID-19 pandemic so far has been the resilience of the Asia Pacific region.
However, many uncertainties remain especially around what the office of the future will look like and how employees will occupy and use that space. With this we have seen a shift in how corporates are envisioning their space requirements, which in turn impacts fit-out decision-making, all within an environment where costs are still being closely scrutinized.
For 31 key cities across 14 markets in APAC, this year’s Guide External Link covers:
A comprehensive fit-out cost breakdown including furniture, professional fees, and construction works
Average costs to reinstate office spaces
Cost estimates of the different styles of fit-out to cater to the post-pandemic workforce
Average retrofitting costs for a budget-friendly alternative if you’re looking to update and refresh your office environment
Kemmu Kawai joined Longevity Partners Japan in September 2022 as the Country Director. Based in Tokyo, he oversees all operations and activities in Japan, the Asia-Pacific region and beyond. He brings him more than 16 years of experience in finance where he specialised in real estate and credit investments. Before joining Longevity Partners, he served as a Portfolio Manager at Norinchukin Bank and as Investment Manager at Center Point Development.
