Thought Leadership

CBRE’s 2023 Global Occupier Sentiment Surveys feature insights from more than 400 corporate real estate executives across multi-national and domestic companies around the world. Their insights on the future of work have identified five trends that will guide global organizations as they optimize their portfolios:

• People are using the office less frequently than they did prior to the pandemic, but attendance is continuing to rise.
• Globally, the office remains a core element of corporate culture.
• Focus on portfolio optimization means more than space downsizing.
• Occupiers trade quantity for better quality space.
• Occupiers seek more flexibility in lease terms and building services.

Survey results portend an increase in office attendance globally in the coming year, especially in markets where employee return has been lagging.

This report was originally published in https://www.cbre.com/insights/reports/2023-office-occupier-sentiment-survey-global-summary

Key findings

With new products like ChatGPT, AI’s potential to transform the global economy has captured the world’s imagination

• AI has enormous potential to reshape real estate, with near and long-term impacts ranging from the emergence of new markets and asset types to innovations in investment and revenue models.
• A rapidly expanding AI ecosystem and its supporting infrastructure will drive demand for real estate in different markets across the globe.
• PropTech adoption has laid a solid foundation for AI integration in real estate. Organizations will need to consider how they can harness AI strategically and ethically, piloting applications before scaling to deliver value.

Japan is the third most sought-after investment destination within APAC for Singapore-based investors, only trailing behind the Chinese Mainland and Australia.

Between 2013 and 2023, an estimated USD 16.2 billion has been injected into Japan’s commercial real estate (CRE) market. Significantly, 12% of this capital influx occurred in the first half of 2023, highlighting a pronounced surge in investor interest.

How have the Japanese government’s monetary policies impacted real estate investors?

The Japanese government’s monetary policies to stimulate domestic inflation have proven to be a significant advantage for real estate investors. This is particularly evident as the Japanese yen has recently touched multi-year lows compared to major global currencies. This trend has created a favorable environment for those in the real estate market.

Despite recent adjustments to its yield curve control targets, the yen’s depreciation against the Singapore dollar was unmistakably pronounced, hitting an unprecedented low in 2023. The added firepower has put Singapore as the top cross-border investor in Japanese real estate so far this year.

Following the lifting of pandemic control measures at the end of 2022, China’s consumer market has rebounded strongly. National total retail sales of consumer goods grew by 8.2% y-o-y in H1 2023, with the contribution rate of final consumption expenditure to economic growth reaching a record-high 77.2%. Domestic demand is now firmly established as the main engine of economic growth.

At the same time, the impact of COVID-19 on the consumption, lifestyles, and values ​​of domestic residents is accelerating the emergence of structural trends that will have a far-reaching impact on the retail sector in areas ranging from store strategy to sustainable development. These trends will also influence demand for retail properties and asset management.

This report by CBRE identifies the main trends characterising China’s retail property market in the post-pandemic era and provides recommendations for retail occupiers, investors and developers preparing to navigate what will be a critical period for the cyclical recovery of China’s retail market and normalisation of domestic consumption.

This report was originally published in https://www.cbre.com/insights/reports/retail-in-the-post-pandemic-era-trends-and-opportunities

Retail leasing demand in the world’s leading retail markets continues to rebound as economic activity recovers in the wake of the COVID-19 pandemic. The Tokyo retail market is no exception, with a resurgence in retailer demand having commenced in H2 2022.

In addition to existing retailers looking to increase their store numbers, several overseas brands have made their first ventures into the Japanese market. As was the case prior to the pandemic, Tokyo continues to be a preferred location for retailers seeking to establish or extend their store presence.

This report compares Tokyo with several of the world’s other major retail markets including New York, London, Paris, Milan, Shanghai, Hong Kong, and Singapore and explores the following factors that make Tokyo, and Japan as a whole, an attractive location for retailers to establish stores.

Tokyo: Rents are reasonable when compared to city GDP
Japan: E-commerce ratio as a percentage of total retail sales is low
Japan: Inbound tourist numbers and tourist consumption have demonstrated considerable scope for growth

This report was originally published in https://www.cbre.com/insights/viewpoints/tokyo-the-city-of-choice-for-retailers

Asia Pacific is continuing to witness aggressive expansion across primary and secondary data centre markets with 9.7GW operational, 3.3GW under construction and 8.5GW in planned stages across the region.

The usual primary markets, Beijing, Hong Kong, Mumbai, Seoul, Shanghai, Sydney and Tokyo, continue to experience growth despite headwinds originating from a lack of land parcels and power availability. As a result, ancillary locations are being evaluated as part of expansion strategies. The moratorium’s cap on Singapore’s IT capacity has led to unmet demand in the market, which has spilt over into nearshore markets such as Johor, which is seeing a huge pipeline under development and commitments to land banks. Similarly, Greater Jakarta’s large pipeline is driven by its central geographic location in South-East Asia and the country’s immense population growth has sustained its appeal to major investors and operators.

Global cloud service providers (CSP) continue to show a marked interest in secondary markets across the region. Hyperscale CSPs have planned presence in the secondary markets of Auckland, Bangkok, Busan, Kuala Lumpur, Osaka, Pune and Taipei.  The tendency for colocation operators, developers and investors to follow CSPs into new frontiers with their own data centre deployments will see secondary markets attract new players and witness rapid growth over the next few years.

The Asia Pacific data centre region is experiencing varying speeds of development and so, for the first time, we have introduced our Asia Pacific Data Centre Markets Maturity Index, to track the evolution of a number of notable markets each quarter. This report will delve into 12 notable markets: Tokyo, Mumbai, Sydney, Singapore, Seoul, Johor, Jakarta, Hong Kong, Manila, Bangkok, Auckland, and Ho Chi Minh City.

Institutional investors have continued to pose faith in the Indian real estate sector despite the global headwinds, including uncertainty over economic growth and geopolitical tensions. The rise in investment inflow is an indication of the growth opportunities as India continues to emerge as a bright spot among international markets.

The country’s property sector has attracted over USD 2.9 bn/USD 2,939 mn worth of investments across 22 deals during H1 2023. The average deal size of investments increased by 17% to USD134 mn compared to USD115 mn, an aggregate of 2022, according to JLL. The investment pattern continues to be robust and is expected to cross USD 5 bn in CY 2023, which has been the annual trend pre-covid and in 2022.

Key highlights of the report:

• H1 2023 witnessed significant increase in domestic capital to 44% share of the total investment compared to 18% in 2022
• Office sector remained the most favoured sector with a major share of 66%
• Residential sector attracted investments of USD 512 mn across nine deals in H1 2023
• Warehousing attracted investment of USD 366 mn i.e.,80% higher than H1 2022
• USD 2,792 mn of platform commitment announced across 4 deals in H1 2023 to be invested in the next few years
• Successful listing of India’s first retail REITs with 81% anchor contribution by major domestic insurance companies, mutual funds, and pension schemes

In recent years, the residential market has consistently embarked on a new chapter of growth, driven by buoyant consumer sentiment, robust property launches, competitive pricing, and a conducive interest rate regime. The strength of the residential market is evident from the robust sales volume recorded in the first half of 2023, with more than 62,000 units sold in each of the two quarters.

Notably, Q2 2023 saw sales of over 64,500 units, representing a 4% quarter-on-quarter growth. Interestingly, residential sales have consistently reached new peaks in each successive quarter over the past year. Aligning with this trend, Q2 2023 surpassed the previous historic high achieved in Q1 2023, making it the highest quarterly sales since 2008.

Key trends in residential market in Q1 2023 and H1 2023:

• Backed by quality launches, quarterly sales set new benchmarks
• Residential sales surge to a 15-year high in H1 2023
• Sales of the premium segment apartments showed an upward trend
• New launches remain buoyant in Q2 2023 and H1 2023
• Bengaluru, Mumbai, and Pune constituted 62% of the quarterly sales
• Robust demand leads to rise in capital values across the top 7 cities in India

Gross leasing activity across the top seven cities of India was recorded at 12.7 mn sq ft in Q2 2023, building on the market traction sustained from the previous quarter and signalling the resilience in India’s office sector. In comparison to H1, gross leasing was also up by 2.5%, showing India’s office markets being clearly insulated from the global headwinds’ impact.

Net absorption is up 4% q-o-q but is typified by occupiers remaining slightly bearish on big expansion plans given the still swirling global headwinds of economic uncertainty. India’s net absorption across the top seven cities broke its declining trend to be at a three-quarter high. While occupiers do remain slightly bearish on expansion activity, India continues to see growth from its domestic firms and global occupiers spreading their wings, albeit at a slightly slower pace.

Space requirements have now stabilized and are showing signs of recovery with deal closures being rolled over and replaced by new requirements, keeping the demand pie intact. While the global headwinds and tech sluggishness would continue to be limiting factors, India’s resilience in the past six months is expected to sustain over the remainder of the year as well. Transaction closures will be relevant to the forecasts of 2023 with any slippages likely to keep 2023 slightly muted but positively impact the years beyond.

Key trends in office segment in Q2 2023

• Net absorption recovers to 7.95 mn sq ft; highest in three quarters
• Quarterly supply at 10.5 mn sq ft; up by 5.3% q-o-q
• Tech continues to lead quarterly occupier activity; flex consolidates its growth and is in second spot
• Rental growth endures across all major cities

As Singapore exits the pandemic and business activity returns to normal, corporate occupiers are placing more emphasis on employee productivity and on increasing office utilisation. With workplace transformation underway, there is strong demand to adapt and “build a better office” to meet the fast-evolving needs of employees and senior management. Additionally, occupiers should be actively identifying new opportunities and strategies to future-proof their portfolios.

CBRE’s 2023 Singapore Office Occupier Sentiment Survey features insights from occupiers across various industries such as financial services, technology, media, telecoms and professional services etc.

Key findings include:

• Singapore’s median utilisation rate stands at 64% and this is expected to increase further over the next 6 to 12 months.
• Leasing sentiment remains cautious in near term with more opting for lease renewals and re-negotiations but 45% expect to grow their corporate portfolios over next 3 years.
• Strong demand for green buildings but amount of green premium remains low. 67% would be willing to pay a premium of less than 5%.
• Staff-to-desk sharing ratios set to increase as more companies adopt flexible seating and hybrid working. 67% plan to increase desk sharing ratios over the next 2 years.

This report was originally published in https://www.cbre.com.sg/insights/viewpoints/2023-singapore-office-occupier-sentiment-survey