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Overview
Global capital markets rallied at the beginning of the year, riding on expectations of a global economic recovery; investors also cheered the swearing-in of US President Joe Biden and the implications of anticipated policy reversals that could arise from the new administration. However, financial markets faltered towards the end of January, ending with a mixed performance as new coronavirus variants and delays to vaccinations prompted caution. Real estate stocks in the region failed to hold on to the rally that started in November last year. However, Japan and Singapore-listed counters managed to buck the overall trend.
Listed Real Estate
The GPR/APREA Listed Real Estate Composite fell at the start of the new year, underperforming both the region’s equity and REIT markets. The declines were seen across the region’s bourses with those in the emerging markets hit particularly hard. Rising infection caseloads threw recovery prospects in doubt as stocks across the major markets in emerging Southeast Asia came under pressure with governments reverting to stricter measures. In Hong Kong, authorities also imposed the city’s first lockdown to battle another wave of infection. Meanwhile, investors became wary after monetary officials in China unexpectedly slowed liquidity injections, signaling a tightening bias as the country’s recovery from the pandemic gains firmer footing.
REITs
Asia Pacific REITs declined in the opening month of 2021 with a marginal 0.3% loss, dragged lower by Australian REITs which fell 4% in January. However, those in Japan and Singapore bucked the regional trend to post increases on the strength of its office and industrial listings. Office S-REITs reportedly remains well poised to capture regional expansion by Chinese tech giants with the likes of Lazada and its parent company, Alibaba, as well as ByteDance, which owns TikTok, expanding its office footprint on the island.
Brookfield India Real Estate Trust, backed by Canadian asset manager Brookfield Asset Management Inc., is seeking to raise as much as US$522 million in an Indian IPO, which is slated for a February debut. Brookfield’s REIT is the third REIT launched in under two year, as acceptance of the investment product gain momentum in the country. India has been seeking to attract more REIT IPOs in recent years by tweaking rules to make the vehicle more attractive for investors and developers.
Blackstone is also believed to be floating its logistics portfolio on the Australian stock exchange, according to newspaper articles. With a 45-asset portfolio across major Australian cities, the newly created Milestone Logistics is expected to raise more than A$1 billion if the IPO is pursued.
Outlook
Asia Pacific REITs could be set for a broader recovery this year, with the continued global economic recovery and low-interest-rate environment a positive for the asset class. However, the pace will remain uneven across sectors. Riding on long-term structural trends, Industrial REITs have emerged as safe-haven assets in a pandemic-ravaged year. This is likely to persist as the increasing prevalence of mutated COVID-19 virus strains could refuel demand in the sector, which we note has outperformed at the height of the pandemic. The fortunes of Office REITs will be bifurcated along with geographies, with those with exposure to the region’s tech hubs likely to outperform. While recovery in the Hospitality and Retail is likely to be more nuanced, vaccine optimism has fueled confidence and likely beneficiaries from a rotation to cyclical stocks. The uncertain course of the pandemic and the trajectory of the global economic recovery, in the meantime, will likely induce more volatility in the short term and remain a huge sentiment driver. However, with continued progress in the development and more visibility on the horizon in the deployment of vaccines, there are reasons to believe that risks in 2021 are weighted on the upside.
Download the Report Read MoreNow more than ever sustainability and ESG topics are coming to the forefront across the globe from a diverse group of stakeholders including employees, customers, suppliers, communities, investors and regulators. Driven in part by the Covid-19 pandemic, there is a focus on employee health & safety, supply chain resilience, and corporate culture, along with growing concerns on climate risk to reputation and the associated impact on corporate value creation.
Read MoreReal estate companies have ramped up their investment in technology in response to the COVID-19 pandemic, finds a survey of some of the biggest property players in Asia.
The survey by independent news source Mingtiandi, in collaboration with technology company Yardi Systems, finds 70 percent of real estate companies are scaling up their investment in property technology, or proptech.
Please click below to download the full report.
Download the Report Read MoreStrata Office Market outlook
Strata Retail Market outlook
Key Forecasts and Outlook: Logistics & Industrial Market
•Across APAC, demand for logistics space has been supported by a long-run shift from physical to online retailing. COVID-19 has driven up e-commerce volumes sharply, while expansion in the cold chain sector and new infrastructure developments should boost demand further. •Most investors and developers already see logistics warehouses as a core asset class.
•With firm demand and limited supply in China’s Tier 1 cities, tenants and owners may have to seek space and opportunities in locations away from the main centres.
•Japan stands out as underserved by modern logistics stock, even though the small modern logistics clusters (e.g. Nagareyama/Kashiwa near Tokyo and Ibaraki City near Osaka) offer some of APAC’s largest and most advanced warehouses. The low availability of modern units means investors and developers can apply value-add strategies to older stock. It is increasingly common to demolish and rebuild.
•Australia has ample Grade A logistics stock, but it is tightly held and vacancy rates are well below their long-run averages. Investors should be willing to buy a portfolio of assets to achieve scale.
•In India, Mumbai and Delhi NCR have vacancy rates of 10-11%, but the other logistics clusters have vacancy of 15-30%. New supplying 2020 is modest in all markets except Delhi NCR.
•Singapore is one of the best-served Asian logistics markets, with a per capita Grade A stock on a GFA basis of 0.8 sqmetres(versus under 0.2 sqmetresin Osaka or South China). As a result, vacancy is 11.7% and we expect modest average annual five-year rent growth of 0.8%.
•Demand for cold chain delivery is soaring. Looking ahead, we expect that big purpose-built cold chain warehouses will be built near ports and transport hubs, while renovated cold chain warehouses will be located nearer cities for easy distribution. Occupiers and owners will find opportunities in both types.
