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We entered 2020 with cautious optimism as Asia-Pacific property markets remained relatively healthy and the phase one trade deal was signed between the US and China. Then COVID-19 struck, throwing markets into turmoil, and with it, knocking many of our previous forecasts off-course. This year has been dominated by the pandemic, with activity and performance of the various real estate asset classes linked to just how they have been impacted by the virus. As this report highlights, geographies and property types have all been influenced by lockdowns, restrictions, and the ensuing economic weakness. However, as we now look towards 2021 and the potential recovery it may bring, here are six trends that give a sense of what lies ahead:

We entered 2020 with cautious optimism as Asia-Pacific property markets remained relatively healthy and the phase one trade deal was signed between the US and China. Then COVID-19 struck, throwing markets into turmoil, and with it, knocking many of our previous forecasts off-course. This year has been dominated by the pandemic, with activity and performance of the various real estate asset classes linked to just how they have been impacted by the virus. As this report highlights, geographies and property types have all been influenced by lockdowns, restrictions, and the ensuing economic weakness. However, as we now look towards 2021 and the potential recovery it may bring, here are six trends that give a sense of what lies ahead:

  1. Work-from-home experiment will leave a lasting impact
  2. Logistics driven by e-commerce and supply chain security
  3. Investors circling for distress may be disappointed
  4. Monetary policy to remain supportive of residential markets
  5. Real estate to contribute to the ‘Green Recovery
  6. US-China relations to continue to be important for the region
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Regional property stocks reversed two consecutive months of falls in November as successful trials of vaccines in development raised hopes for an end to the pandemic. As a Joe-Biden victory bred expectations of a more stable geopolitical environment, the world’s largest trade pact was also inked in November. Fifteen Asia-Pacific economies including those in the ASEAN bloc, Australia, China, Japan, South Korea and New Zealand committed to the Regional Comprehensive Economic Partnership, underscoring the significant role the accord could play in post-pandemic recovery efforts.

Regional property stocks reversed two consecutive months of falls in November as successful trials of vaccines in development raised hopes for an end to the pandemic. As a Joe-Biden victory bred expectations of a more stable geopolitical environment, the world’s largest trade pact was also inked in November. Fifteen Asia-Pacific economies including those in the ASEAN bloc, Australia, China, Japan, South Korea and New Zealand committed to the Regional Comprehensive Economic Partnership, underscoring the significant role the accord could play in post-pandemic recovery efforts.

 Listed Real Estate

The GPR/APREA Listed Real Estate Composite returned 11.4%, outperforming the region’s equities market. Property stocks across most of the region, particularly those in emerging Southeast Asia, rose. Thailand shrugged off continued civil unrest to post the region’s largest returns; those in Australia gained on easing lockdowns in the state of Victoria. Hong Kong and China also rode higher on upbeat data signaling continued recovery in the world’s second-largest economy, with consumer spending picking up steadily and industrial output rising faster than expected in October. The country’s central bank had in November pumped more liquidity into the financial system to maintain momentum.

REITs

Asia Pacific REITs, as tracked by the GPR/APREA Composite REIT Index, closed 9.7% higher. Similarly, the rebound was led by the sectors that had been hit the hardest by the pandemic.

Retail REITs clocked the highest gains, followed by those in Hospitality as both sectors are likely to benefit the most from the rollout of a vaccine. Office REITs also rose on the back of a rotation to economically sensitive stocks. Industrial REITs were notably left out of the rally.

Across much of the region’s bourses, REIT stocks posted double-digit gains. Thailand’s component stocks led the way, with its Retail and Hospitality REITs rebounding on a surge of optimism as the kingdom reopened its borders to all tourists through a 60-day travel visa. Easing lockdowns also lifted Retail REITs in Australia.

Outlook

Sustained recovery beyond the Industrial sector remains a prerequisite for a revival to pre-pandemic highs. While Retail and Hospitality will continue to retrace their pre-pandemic highs, the path is likely to remain uneven without clarity on a full return to normalcy. As euphoria over the progress of vaccine trials is gradually priced in, further direction will, in the interim, be focused on shorter term dynamics as investors remain skittish over the near-term outlook. Still, we expect the wave of vaccine-related optimism to remain sustained into December. The broadening recovery into riskier assets so far is signaling investors’ belief that if anything, the outlook is at least brighter. A stimulus deal in the US, currently stymied by political wrangling, and better-than-expected third quarter GDP growth figures in the region are sentiment drivers and could still shore up markets.

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  • Savills Tech Cities are important centres for tech in their region and venture capital (VC) investment hotspots. Vibrant cities in which to live and work, they are magnets for talent.
  • Wellness matters more than ever to both tech talent and business occupiers. Our Tech Lifestyle Cities have an edge here, with better air quality, access to greenspace and smaller footprints. Savills Digital Nomad Essentials Index highlights some of the factors that count to talent today.
  • In spite of 2020’s upheavals, the Tech Megacities continue to dominate VC investment, led by Beijing and San Francisco. Singapore has received a boost, benefiting in part from the US-China trade war.
  • A new raft of Rising Global Tech Contender cities are emerging, ranging from Detroit to Yokohama. Growth is fuelled by technological advances, government initiatives and cost advantages.
  • While many tech companies have adopted work from home strategies in the wake of the pandemic, their city centre offices and campuses, in which they have invested heavily, will remain important as places for staff to collaborate, to instil company culture, and to attract the best and brightest.
  • Out of town tech campuses have taken on a fresh relevance in a time of social distancing and newfound focus on health and wellbeing. We explore five examples with wellness at their core
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Based on our forecast model and insight from over 100 fund managers and 100 investors, we provide a detailed forecast of what the alternatives industry could look like in 2025. We analyze what the next five years hold for each asset class and region, explore changes underway in the investor universe, and identify the megatrends driving change in the industry.

We expect AUM growth in alternative assets to average 9.8% per year to 2025. Persistently low interest rates will attract investors of all types drawn to the promise of outperformance, diversification, and lower correlation with public markets. Among our key predictions, private equity will top $9tn in assets by 2025, and Asia’s AUM will grow at a world-beating CAGR of 25.2%. Our forecast is supported by our Future of Alternatives 2025 survey, in which 81% of investors said they expect to increase allocations to alternatives in the next five years.

Read the report for AUM forecasts, data-driven analysis, insights, and predictions. Some of them may surprise you…

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When COVID hit the world, the accompanying lockdowns brought the term Work(ing) From Home (WFH) from the margin to the mainstream. This sounded alarm bells around the world, from savvy investors like Warren Buff et to analysts and other market watchers, thinking that the age of the CBD office market is over. Those who believe that WFH will significantly reduce demand for office space have valid reasons but their concerns about demand have not been articulated considering the following:

When COVID hit the world, the accompanying lockdowns brought the term Work(ing) From Home (WFH) from the margin to the mainstream. This sounded alarm bells around the world, from savvy investors like Warren Buff et to analysts and other market watchers, thinking that the age of the CBD office market is over. Those who believe that WFH will significantly reduce demand for office space have valid reasons but their concerns about demand have not been articulated considering the following:

  1. The discrete nature of office leasing terms
  2. Time domain
  3. New demand

By not accounting for these factors, any analysis of the market is likely to fall short of the mark. Today, we will analyze the Singapore CBD Grade A Office market to look at how it may permutate over time after we adjoin these three extensions to the mainstream WFH belief that there will be a sharp climbdown in demand. From a list of permutations, we will input our prior probabilities as to which of these are likely to play out in future. This approach is in sharp contrast to providing a singular outcome after just one round of reasoning.

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Many occupiers are looking to reduce the total amount of office space they occupy, due to the preference for some employees to continue working from home following lockdown. This change in occupier preference, combined with the large amount of new supply, has resulted in occupiers looking to…

Many occupiers are looking to reduce the total amount of office space they occupy, due to the preference for some employees to continue working from home following lockdown. This change in occupier preference, combined with the large amount of new supply, has resulted in occupiers looking to secure smaller office spaces within new developments, enabling them to increase the quality of their offices whilst also potentially reducing their total rent. This shift will have a severe impact on landlords of older buildings, however and it is likely that occupancy rates across the market will continue to fall.

With the eff ects of the pandemic looking likely to continue into 2021, Savills expects to see more occupiers looking to reduce their office space. Considering this along with the large amount of future supply completing over the next five years, it’s likely a large number of occupiers will seek to relocate into smaller units within newly completed office buildings.

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The trade war between China and the US has pushed Taiwan’s tech and manufacturing companies to rethink their supply chain strategies which used to rely heavily on China. Taiwan’s tech industry saw a large wave of off shoring to China from 2000, especially the electronic component and computer sectors, resulting in…

The trade war between China and the US has pushed Taiwan’s tech and manufacturing companies to rethink their supply chain strategies which used to rely heavily on China. Taiwan’s tech industry saw a large wave of off shoring to China from 2000, especially the electronic component and computer sectors, resulting in four of China’s top 10 companies exporting to the US originating from Taiwan, including Foxconn, Quanta, Pegatron, and Compal Electronics. As the trade war tensions have escalated, Taiwanese companies are considering relocating production lines to Southeast Asia and Taiwan in order to diversify their manufacturing base.

Industrial land prices have increased steadily over the past five years owing to the strong demand from local end-users. Although the global economic outlook is gloomy, we believe that the average industrial land price could rise by 3% in 2020, especially in traditionally cheaper areas. As land prices in New Taipei City and Taoyuan have increased significantly, tech corporates have had to modify their factory expansion plans to focus on more affordable areas, such as industrial parks in middle and southern Taiwan. We reason that industrial land in those areas is expected to witness stronger price growth in the near future.

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Retail projected were forced to actively adjust their tenant brand mixes to stand out in the increasingly competitive crowd of retail projects in Chongqing. Following the Metro Park’s substantial brand adjustment in 1H/2020…

Retail projected were forced to actively adjust their tenant brand mixes to stand out in the increasingly competitive crowd of retail projects in Chongqing.

Following the Metro Park’s substantial brand adjustment in 1H/2020, the shopping mall actively introduced many new retail brands into its low zones, such as children’s entertainment brands, medical beauty institutions and fine dining establishments with larger leased areas than in the high zone, helping strengthen the brand richness in the project.

In Q3/2020, Starlight Plaza, located in the Jiefangbei submarket, announced that it would officially launch a major adjustment to comprehensively renew the positioning of the mall and brand categories to accelerate the integrated development of the project. This adjustment will be the first since the project opened in 2015.

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Hyderabad has steadily risen to a position among the top three office markets of the country. In terms of office leasing volumes, it has progressed from being a distant sixth to its current position in a span of just three years. In 2019, the city registered record transaction activity of approximately 9.5 million sq ft, just behind Bangalore and the National Capital Region (NCR).

The rise in commercial leasing activity can be attributed to a variety of factors. These include government support by way of… 

Hyderabad has steadily risen to a position among the top three office markets of the country. In terms of office leasing volumes, it has progressed from being a distant sixth to its current position in a span of just three years. In 2019, the city registered record transaction activity of approximately 9.5 million sq ft, just behind Bangalore and the National Capital Region (NCR).

The rise in commercial leasing activity can be attributed to a variety of factors. These include government support by way of investor friendly policies and infrastructure growth matching urban agglomeration expansion; as well as enabling demographics which has created an abundant and skilled talent pool. Also, the influx of MNCs over the last two decades has been instrumental in setting up large campuses and office complexes in the city. In recent landmark legislation, the state government announced a single window portal facilitating faster clearances and self-certification for real estate construction on land parcels of a specific size. Such enabling regulations have provided an important boost to the real estate sector in the city.

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While sentiment is weak, the lack of concluded transactions across the market makes it difficult to quantify rental movements. Most landlords have left asking rents at their previous level, however many are willing to discuss higher incentives once they are sure a potential tenant is serious. We have observed that there are requests from…

While sentiment is weak, the lack of concluded transactions across the market makes it difficult to quantify rental movements. Most landlords have left asking rents at their previous level, however many are willing to discuss higher incentives once they are sure a potential tenant is serious. We have observed that there are requests from occupiers / prospects for a more flexible lease term (less than three years) and have seen landlords considering exploring amortization of fit-out costs over a reasonably long lease term.

In June 2020, IGB Bhd announced the proposed establishment of a pure-play office asset REIT which is targeted to be completed by the end of 2020 / early 2021. The proposed IGB Commercial REIT is reported to involve the sale of ten properties, seven of which are in Mid Valley City and three in the Golden Triangle. This is the second REIT by IGB Bhd since the establishment of IGB REIT in 2012, comprising two prime retail assets; Mid Valley and The Gardens.

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